Vick incorporated sold bonds on January 1, 2005. The bonds were 15 year bonds with a 4% coupon. The market rate of interest was 5 percent. The terminal value of the bond is 1000 in all practice problems and on exam as well. In the exam questions I will explicitly state it. 1. What was the price of the bonds ? 2. What was the interest expense for the first two years ? 3. On January 1, 2007 (after two years) the market rate of interest was now 3 percent. What would be the price of the bonds now? 4. If Vick were to buy back the bonds at this time, what would be the gain or loss?

Vick incorporated sold bonds on January 1, 2005. The bonds were 15 year bonds with a 4% coupon. The market rate of interest was 5 percent. The terminal value of the bond is 1000 in all practice problems and on exam as well. In the exam questions I will explicitly state it. 1. What was the price of the bonds ? 2. What was the interest expense for the first two years ? 3. On January 1, 2007 (after two years) the market rate of interest was now 3 percent. What would be the price of the bonds now? 4. If Vick were to buy back the bonds at this time, what would be the gain or loss?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 17P

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