   Chapter 7, Problem 2Q Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977

Solutions

Chapter
Section Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977
Textbook Problem

Can the following equation be used to find the value of a bond with N years to maturity that pays interest once a year? Assume that the bond was issued several years ago. V 6 = ∑ t = 1 N Annual interest ( 1 + r d ) t + Par value ( 1 + r d ) N

Summary Introduction

To identify: Whether the given equation can be used to find the bond value.

Bond Valuation: Bond valuation refers to the evaluation of bonds value at any point of time which can be used for decision making. Valuation of bond is done for comparison and analysis.

Explanation

Formula to calculate present value of bond,

VB=t=1NAnnualInterest(1+rd)t

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