Answered: What should be the price of a bond…

What should be the price of a bond which has a par value of Rs. 1000 carrying a coupon rate of 8% and having a maturity period of 9 years? The required rate of return of the investor is 12 %.

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 4MC

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Concept explainers

Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.

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What should be the price of a bond which has a par value of Rs. 1000 carrying a coupon rate of 8% and having a maturity period of 9 years? The required rate of return of
the investor is 12%.

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