The Biscoft Corporation issues 12% annual coupon bonds that pay $1, 000 at matur
ID: 2757873 • Letter: T
Question
The Biscoft Corporation issues 12% annual coupon bonds that pay $1, 000 at maturity. These bonds mature in 15 years. What is the value (PV) or (y$) of the bonds if the current or market or prevailing or going or YTM is 10%. Show work Now assume that the currcnt or market or prevailing or going or VTAA rate is 12% on the bond in #3 above. What is its V_2 or PV? Show work Now assume that the current or market or prevailing or going or YTM rate is 14% on the bond in #3 above What is its V9 or PV? Show workExplanation / Answer
1) Present Value of Bond would be the current market price of Bond
Summation of Discounting factor for year 1-15 @ 10% = 7.61
Discounting factor at Year 15 @10% = 0.239
Current Value of Bond = 7.61 * 120 + 0.239*1000 = 913.2 + 239 = 1152.2
2)
Present Value of Bond would be the current market price of Bond
Summation of Discounting factor for year 1-15 @ 12% = 6.81
Discounting factor at Year 15 @12% = 0.182
Current Value of Bond = 6.81 * 120 + 0.182*1000 = 913.2 + 239 = 999.2 or 1000
3)
Present Value of Bond would be the current market price of Bond
Summation of Discounting factor for year 1-15 @ 14% = 6.002
Discounting factor at Year 15 @14% = 0.159
Current Value of Bond = 6.002 * 120 + 0.159*1000 = 720 + 159 = 879
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