Determine total expenditure, Finance Basics

Determine the amount you would be willing to pay for a $1,000 par value bond paying $80 interest each year (annual) and maturing in 12 years, assuming you wanted to earn a 9% rate of return. 

a

Interest per year

   

 mce_markernbsp;                              80.00

b

Years to maturity

   

12

c

Par value

     

 mce_markernbsp;                        1,000.00

d

Required rate of return

 

9%

e

Intrinsic value of bond

 

 mce_markernbsp;                           928.39

 

($1000/1.09^12 + $80 x PVIFA(12,9%)

 

 

 

Posted Date: 7/23/2012 2:05:48 AM | Location : United States







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