6-5 Eleven years ago, Elite Elements issued a 15-year bond with a $1,000 face value and...

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Question

Answer 1

Answer #1

Below is the calculation of the price of the bond:

Year	CF	Discount Factor		Discounted CF
1	$ 25.00	1/(1+0.07/)^1=	0.966183575	0.966183574879227*25=	$ 24.15
2	$ 25.00	1/(1+0.07/)^2=	0.9335107	0.933510700366403*25=	$ 23.34
3	$ 25.00	1/(1+0.07/)^3=	0.901942706	0.901942705668022*25=	$ 22.55
4	$ 25.00	1/(1+0.07/)^4=	0.871442228	0.871442227698572*25=	$ 21.79
5	$ 25.00	1/(1+0.07/)^5=	0.841973167	0.841973166858524*25=	$ 21.05
6	$ 25.00	1/(1+0.07/)^6=	0.813500644	0.813500644307753*25=	$ 20.34
7	$ 25.00	1/(1+0.07/)^7=	0.785990961	0.785990960683819*25=	$ 19.65
8	$ 1,025.00	1/(1+0.07/)^8=	0.759411556	0.759411556216251*1025=	$ 778.40
				Price= Sum of all Discounted CF	$ 931.26

Answer 2

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