Essay
A corporate bond has a $10,000 face value and offers a 7% coupon rate. The bond matures at the end of three years.
a. If the interest rate is 7%, what is the present discounted value of the bond?
b. If the interest rate is 5%, what is the present discounted value of the bond?
c. Suppose the bond is selling for $9,800. Show how you would solve for the bond's yield to maturity.
Correct Answer:
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a. PDV = 700/1.07 + 700/1.072 + 10,700/1....View Answer
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