Suppose a 15- year corporate bond has a 10% coupon rate and a $1,000 par value. Coupons are paid once per year. When interest rate is 10% annually 1 Vi = $100×| (1+10%)'5 $1,000 + ,Vb = $1,000 10% (1+10%)'5 * 1 When interest rate is 8% annually (1+8%)'5 $1,000 V6 = $100x = $1,171.19 8% (1+8%)'5

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 9P
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What is the $100

Suppose a 15- year corporate bond has a 10% coupon rate and a
$1,000 par value. Coupons are paid once per year.
When interest rate is 10% annually
1
1-
(1+10%)'5
$1,000
Vb = $100x
10%
(1+10%)!5 »Vb = $1,000
1
1
When interest rate is 8% annually
(1+8%)5
$1,000
+
Vo =$100x
$1,171.19
8%
(1+8%)5
Transcribed Image Text:Suppose a 15- year corporate bond has a 10% coupon rate and a $1,000 par value. Coupons are paid once per year. When interest rate is 10% annually 1 1- (1+10%)'5 $1,000 Vb = $100x 10% (1+10%)!5 »Vb = $1,000 1 1 When interest rate is 8% annually (1+8%)5 $1,000 + Vo =$100x $1,171.19 8% (1+8%)5
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