Question

Calculate the fair present values of the following bonds, all of which pay interest semiannually, have a face value of $1,000, have 10 years remaining to maturity, and have a required rate of return of 10 percent. a. The bond has a 5 percent coupon rate. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) b. The bond has a 7 percent coupon rate. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) C. The bond has a 10 percent coupon rate. (Do not round intermediate calculations.) a. Fair present value b. Fair present value c. Fair present value

Answer 1

Fair present value = = present value of coupon payments + present value of face value PMT*(1-(1/(1+r^n)))/r+ (face value/(1+r)^n a. Fair present value = $688.44 25*(1-(1/(1.05^20)}}/0.05+(1000/1.05^20) b. Fair present value = $813.07 35*(1-(1/(1.05^20)))/0.05+(1000/1.05420) c. Fair present value = $1,000.00 50*(1-(1/(1.05^20)}}/0.05+(1000/1.05^20)