Correct valuation equation for this bond

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Reference no: EM13806182

Dizzy Corporation’s 10-year semi annual bond bearing a coupon rate of 12% is currently selling for $950. Given this information, which of the following is the correct valuation equation for this bond? Note: PVIFA(r,t) = [{1-1/(1+r)t}/r] and PVIF(r,t) = 1/(1+r)t.

A. B = 120 [PVIFA(12%, 10)] + 1,000 [PVIF(12%, 10)]

B. $950 = 120 [PVIFA(r, 10)] + 1,000 [PVIF(r, 10)]

C. $950 = 60 [PVIFA(r/2, 20)] + 1,000 [PVIF(r/2, 20)]

D. B = 60 [PVIFA(6%, 20)] + 1,000 [PVIF(6%, 20)]

Reference no: EM13806182

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