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How much should you be willing to pay for this bond today

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Question - Assume that you are considering the purchase of a 1,000 par value bond that pays interest of $50 each six months and has 18 years to go before it matures. If you buy this bond you expect to hold it for 4 years and then to sell it in the market. You (and other investors) currently require a nominal annual required rate of return (rd) of 14 percent, but you expect the market to require a nominal annual rate of only 12 percent when you the bond four years from today due to a general decline in interest rates. How much should you be willing to pay for this bond today?

Reference no: EM132877554

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