Can someone please explain in detail how to solve this? Question 8 1 pts Eastern

Question

Can someone please explain in detail how to solve this?

Question 8 1 pts Eastern Corporation has $1,000 par value bonds with 4 years to maturity. The bonds pay an 8% coupon rate with semi annual coupon interest payments. The bond's closing price is quoted at 101.25. If your required rate of return is 9.5%. what would be the bond's intrinsic value? O $951 O $973 O $1,310 O $701 O $1,212 Question 9 1 pts Six years ago, James Corporation sold a $100 million bond issue to expand its facilities. Each debenture has a $1,000 par value, an original maturity of 20 years (there are now 14 years left to maturity), and an annual coupon rate of 11.5% with semiannual payments. If you require a 14% return, what price would you pay today for a James bond? O $826 $833 $848 $868 O $890

Explanation / Answer

1 Par value (FV) $                                          1,000 2 Coupon rate 8.00% 3 Number of compounding periods per year 2 4 = 1*2/3 Interest per period (PMT) $                                          40.00 5 Number of years to maturity 4 6 = 3*5 Number of compounding periods till maturity (NPER) 8 7 Market rate of return/Required rate of return 9.50% 8 = 7/3 Market rate of return/Required rate of return per period (RATE) 4.75% Bond intrinsic value PV(RATE,NPER,PMT,FV)*-1 Bond intrinsic value $                                             951

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---