Annual coupon=1000*8%=80
Hence current price=Annual coupon*Present value of annuity factor(9%,24)+$1000*Present value of discounting factor(9%,24)
=80*9.70661177+$1000*0.126404941
=$902.93(Approx).
NOTE:
1.Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate
=80[1-(1.09)^-24]/0.09
=80*9.70661177
2.Present value of discounting factor=$1000/1.09^24
=$1000*0.126404941
q 3 Madsen Motors's bonds have 24 years remaining to maturity. Interest is paid annually, they...
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