Calculate the fair present values of the following bonds, all of which pay inter

Question

Calculate the fair present values of the following bonds, all of which pay interest semiannually, have a face value of $1,000, have 12 years remaining to maturity, and have a required rate of return of 10 percent.

The bond has a 6 percent coupon rate. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

The bond has a 8 percent coupon rate. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

The bond has a 10 percent coupon rate. (Do not round intermediate calculations.)

The bond has a 6 percent coupon rate. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

a)  6 percent coupon rate:

Fair value = 30*((1-(1+5%)^(-24)))/5%+1000/(1+5%)^24

=$724.03

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b) 8 percent coupon rate

Fair Value = 40*((1-(1+5%)^(-24)))/5%+1000/(1+5%)^24

=$862.01

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c) 10 percent coupon rate:

Fair Value =50*((1-(1+5%)^(-24)))/5%+1000/(1+5%)^24

=$1000

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