Bond Calculation

Bond Calculation - Using Cash Flow of $1000 to calculate...

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(Bond valuation) A $1,000 face value bond has a remaining maturity of 10 years and a required  return of 9%. The bond's coupon rate is 7.4%. What is the fair value of this bond? Calculating PV factor i= required return = 9% = 0.09 n= 10 years  Using Coupon Rate to calculate present value of Annuity,
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Unformatted text preview: Using Cash Flow of $1000 to calculate present value, Cash flow= $1000 * 7.4/100 = $74 Cash flow= $1000 PV factor = (1/i)*(1- 1/(1+i)^n) = 6.4176 PV factor = 1/(1+i)^n = 0.42241 So the fair value of bond = 474.9024+422.41 = $897.31...
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This note was uploaded on 03/23/2012 for the course ACCT 306 taught by Professor Mikewoodard during the Spring '12 term at DeVry Houston.

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