A Corporation sold an issue of 15 year $1000 par bonds to build new bu

QUESTION

A Corporation sold an issue of 15 year $1000 par bonds to build new buildings. The bonds pay 6.85% interest, semi-annually. Todays required rate of return is 8.35%. How much should these bonds sell for today rounded to the nearest $1?Please calculate out specifically. I am new to these calculatio
According to the given information,Face value of the bond = $1000Years to maturity = 15Number of semi-annual periods = 15 * 2 = 30Interest rate = 6.85%Semi-annual interest rate = 3.425%Required rate of return = 8.35%Semi-annual required return = 4.175%What is the present value of the bond?Here to calculate the present value of the bond, we need to compute the semi-annual coupon payment.Semi-annual coupon payment = Face value * Interest rate = $1000 * 3.425% = $34.25Therefore, the semi-annual coupon payment is $34.25Computing the present value of the

bond using excel sheet:Step1: Go to excel and click “insert” to insert the function.Step2: Select the “PV” function as we are finding the present value of the bond in this case.Step3: Enter the values as Rate = 4.175%; Nper = 30; PMT = -34.25; FV = -1000Step4: Click “OK” to get the desired value.The value comes to “$873″Therefore, the present value of the bond is $873

ANSWER:

CLICK REQUEST FOR  AN EXPERT SOLUTION