Answered: a. A perpetual bond has Tk. 1,200 face…

a. A perpetual bond has Tk. 1,200 face value and provides a 10.5% coupon. If the market price of the bond is Tk. 1,050, what is its yield to maturity?

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter14: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 7DTM

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Question

4. a. A perpetual bond has Tk. 1,200 face value and provides a 10.5% coupon. If the
market price of the bond is Tk. 1,050, what is its yield to maturity? 03
b. A zero-coupon, Tk. 1000 face-value bond is currently selling for Tk. 208 and
matures in exactly 10 years. What is the required rate of return on this bond? 04
c. ABC Company has outstanding, an 10 percent, four year, Tk. 1,000 par value
bond on which interest is paid monthly. If the market rate of return is 15 percent,
what is the intrinsic value of the bond?

Definition Definition Calculates the present value of a bond's expected future periodic coupon payments. Bond valuation determines the theoretical fair value of a particular bond and helps investors estimate what rate of return they could expect. The bond's theoretical fair value is computed by discounting the future cash flows or coupon payments by an applicable discount rate.

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