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Calculate the bond value based on required rate of return

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Reference no: EM133121500

Question - Assume that you are considering an investment in a corporate bond with the following characteristics:

Par value $1,000

Coupon rate 8.5% per year

Payment schedule semiannual (May 1 and November 1)

Maturity date May 1, 2032

The bond's current market value is 115.50 (that is, 115.50%% of par value).

For this bond, assume a required rate of return equal to 7.0% per year.

1. Draw a timeline showing the cash flows for this bond.

2. Calculate the bond value based on the required rate of return.

3. Calculate the yield-to-maturity based on the current market price.

Reference no: EM133121500

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