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What is the present value

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Question - A $1,000 face value bond issued by the Purdue Company currently pays total annual interest of $80 per year and has a 15-year life.

a. What is the present value, or worth, of this bond if investors are willing to accept a 10 percent annual rate of return on bonds of similar quality bond?

b. How would your answer change is the bond makes semi-annual payments?

c. How would your answer in (a) change if, one year from now, investors only required a 6 percent annual rate of return on bond investments similar in quality to the Purdue bond?

d. Suppose the original bond can be purchased for $925. What is the band's yield to maturity?

Reference no: EM133103831

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