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Calculate the value of the bond

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Reference no: EM133156388

Question - You own a bond with a par value of $1000 that pays a $100 annual coupon. The bond matures in 15 years. Your required rate of return is 12% p.a.

(a) Calculate the value of the bond.

(b) How does the value of the bond change if your required rate of return (i) increases to 15% p.a. or (ii) decreases to 8% p.a.?

(c) Assume that the bond matured in 5 years instead of 15 years. Re-compute your answers in part (b).

Reference no: EM133156388

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