Explain why the bond has a value

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Two years a ago, Gamma Inc. sold a $250 million bond issue to finance the purchase of new jet airliners. These bonds were issued in $1,000 denominations with an original maturity of 14 years and a coupon rate of 12% with interest paid semi-annually. Determine the value today of one of these bonds to an investor who requires a 14 % return on these securities. Explain why the bond has a value that is not equal to the par value.

Reference no: EM132443379

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