Tom Inc. bonds mature in 8 years, have a par value of $1,000, and make an annual coupon interest payment of $65, paid semiannually. The market requires an interest rate of 6.7% on these bonds. What is the bond's price? Group of answer choices a)$1143.2 b)$780.2 c)$987.8 d)$1156.5

Tom Inc. bonds mature in 8 years, have a par value of $1,000, and make an annual coupon interest payment of $65, paid semiannually. The market requires an interest rate of 6.7% on these bonds. What is the bond's price? Group of answer choices a)$1143.2 b)$780.2 c)$987.8 d)$1156.5

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter6: Bonds (debt) - Characteristics And Valuation

Section: Chapter Questions

Problem 14PROB

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Question

Group of answer choices

a)$1143.2

b)$780.2

c)$987.8

d)$1156.5

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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