What is the current price of a P1,000 par value bond maturing in 12 years with a coupon rate of 14%, paid semiannually, that has a yield-to-maturity of 13%? a. P604.00 b. P1,090.00 c. P1,060.00 d. P1,073.00

What is the current price of a P1,000 par value bond maturing in 12 years with a coupon rate of 14%, paid semiannually, that has a yield-to-maturity of 13%? a. P604.00 b. P1,090.00 c. P1,060.00 d. P1,073.00

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 14P: Current Yield with Semiannual Payments A bond that matures in 7 years sells for $1,020. The bond has...

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Question

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What is the current price of a P1,000 par value bond maturing in 12 years with a coupon rate of 14%, paid semiannually, that has a yield-to-maturity of 13%?

a. P604.00

b. P1,090.00

c. P1,060.00

d. P1,073.00

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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Follow-up Question

The bond has the current price of $1,123 and par value of $1,000. The bond matures in 7 years and yields 12%. If the interest is paid semi-annually what will be the bond's annual coupon rate?

Answer choices:

a. 12.23%

b. 14.65%

c. 13.45%

d.17.65%

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