Computation of value or price of bond

Reference no: EM1310124

Corp Inc. has two different bonds currently outstanding. Bond A has a face value of $40,000 and matures in 20 years. The bond makes no payments for the first 6 years, pays $2,000 semi-annually for the subsequent 8 years and finally pays $2,500 semi-annually for the last 6 years. Bond B also has a face value of $40,000 and matures in 20 years. However, it makes no coupon payments over the life of the bond. If the stated annual interest rate is 12 %, compounded semi-annually,

a) What is the price of Bond A?

b) What is the price of Bond B?

Reference no: EM1310124

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