LoriTurner Posts: 4, Reputation: 1 New Member #1 Jun 3, 2006, 02:12 PM
hope somebody can figure this out
:confused:

Zoro Sword company bonds pay an annual coupon of 9 1/2 %. They have 8 years to maturity and face value, or par, of \$1000. Compute the present value of Zoro bonds if investors required rate of return is 10%.

a) \$950.00

b) \$973.33

c) \$ 1027.17

d) \$1516.18

 CaptainForest Posts: 3,645, Reputation: 393 Ultra Member #2 Jun 3, 2006, 05:45 PM

Bond Price = C / (1+i) + C / (1+i)^2 +... + C / (1+i)^n + M / (1+i)^n

C = coupon payment
n = number of payments
I = interest rate, or required yield
M = value at maturity, or par value

Coupon = .095 x 1,000 = \$95
Maturity of the bond = 8 years
Interest = 10%
Principle = 1,000

Bond Price = 95/1.1 + 95/1.1^2 + 95/1.1^3 + 95/1.1^4 + 95/1.1^5 + 95/1.1^6 + 95/1.1^7 + 95/1.1^8 + 1,000/1.1^8
Bond Price = 973.33

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