Access over 20 million homework & study documents

search

Company X sold an issue of bonds with a 20 year maturity, a $1000 pa

Content type
User Generated
Rating
Showing Page:
1/1
Company X sold an issue of bonds with a 20-year maturity,
a $1000 par value, an 8% coupon rate, and annual interest
payments. 8 years after issue, the going rate of interest on
comparable bonds rose to 10%. At what price would the
bonds sell?
Solution
Interest Rates has an inverserelationship with bond price
so
if interest rate rose to 10 % then the price will be,
1000*8% = 80
80/10% = 800
Bond Price would be 800

Sign up to view the full document!

lock_open Sign Up
Unformatted Attachment Preview
Company X sold an issue of bonds with a 20 -year maturity, a $1000 par value, an 8% coupon rate, and annual interest payments. 8 years after issue, the going rate of interest on comparable bonds rose to 10%. At what price would the bonds sell? Solution Interest Rates has an inverserelationship wit ...
Purchase document to see full attachment
User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Anonymous
Just what I was looking for! Super helpful.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4