A $1000 par value 9% bond with semiannually coupons is callable 6 years after issue. The bond matures for $1000 at the end of ten years and is sold to yield a nominal rate of 4% convertible semiannually under the assumption that the bond will not be called. Find the redemption value at the end of 6 years that will provide the purchaser the same yield rate.

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 7P: Bond Valuation with Semiannual Payments Renfro Rentals has issued bonds that have a 10% coupon rate,...
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A $1000 par value 9% bond with semiannually coupons is callable 6 years after issue. The bond matures for $1000 at the end of ten years and is sold to yield a nominal rate of 4% convertible semiannually under the assumption that the bond will not be called. Find the redemption value at the end of 6 years that will provide the purchaser the same yield rate.

ANSWER = $

 

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