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Compute what is the present value of the bond

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Assume a $1000 face value bond has a coupon rate of 8.5%, pays interest annually, and has an 8-year life.

Problem 1: If investors are willing to accept a 9.25% rate of return on bonds of similar quality, what is the (present) value of this bond and is it selling at a premium or discount?

Problem 2: What would be value of this same bond if investors are instead willing to accept an 8.25% rate, and is it selling a premium or discount?

Reference no: EM132684799

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