Answer to Question #51314 in Finance for mohammed abdu
Power of Tower Inc. has bonds that mature in 6½ years with a par value of RM1,000.
They pay a coupon rate of 9% with semiannual payments. If the required rate of
return on these bonds is 11% what is the bond's current value?
N = 6½ years, F = RM1,000, if = 9% with semiannual payments, i = 11%. The bond's current value is: P = F*if((1 - (1 + i)^-n)/i) + F(1 + i)^-n where: C = F * iF = coupon payment N = number of payments i = market interest rate, or required yield, M = face value P = market price of bond. P = 1000*0.09*((1 - 1/1.11^13)/0.11) + 1000/1.11^13 = RM865.