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diamong [38]
3 years ago
14

Borland, Inc. issues 25-year semi-annual bonds that have a face value of $1,000 and a coupon rate of 7.5%. The current market pr

ice for the bonds is $950.00. If your required rate of return is 8.5%, what is the value of one of these bonds to you
Business
1 answer:
cluponka [151]3 years ago
3 0

Answer: $897.03

Explanation:

You can use Excel to calculate this.

The bond is a semi-annual bond so you need to adjust the variable for this first.

Number of periods = 25 * 2 = 50 semi-annual periods

Coupon = 7.5% * 1,000 * 0.5 semi-annual adjustment = $37.50

Yield = 8.5% / 2 = 4.25%

Value to you = $897.03

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