Las Paletas Corporation has two different bonds currently outstanding. Bond M ha
ID: 2623923 • Letter: L
Question
Las Paletas Corporation has two different bonds currently outstanding. Bond M has a face value of $20,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $1,300 every six months over the subsequent eight years, and finally pays $1,600 every six months over the last six years. Bond N also has a face value of $20,000 and a maturity of 20 years; it makes no coupon payments over the life of the bond. The required return on both these bonds is 8 percent compounded semiannually.
What is the current price of bond M and bond N?
(Round your answers to 2 decimal places. (e.g., 32.16))
SHOW your work.. I need to be able to solve this by hand/calculator.
Las Paletas Corporation has two different bonds currently outstanding. Bond M has a face value of $20,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $1,300 every six months over the subsequent eight years, and finally pays $1,600 every six months over the last six years. Bond N also has a face value of $20,000 and a maturity of 20 years; it makes no coupon payments over the life of the bond. The required return on both these bonds is 8 percent compounded semiannually.
Explanation / Answer
FV 1,000 PMT 50 N 16 R 4.25% Present Value = $1,085.80
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