Business, 22.04.2021 16:10 ayoismeisalex

Suppose you own a 30-year bond issued by CQ Telecommunications with a face value of $1,000 paying a semiannual coupon interest rate of 6% that has 10 years remaining until maturity. If interest rates in the general economy jump to 8% after one year, no one will want to buy your 6% bond for $1,000, because it pays only $ per year in interest. If you want to sell the bond, then the bond price will have to be . If rates on similar bonds are now at 8%, then the discount rate is 8% (or 4% twice a year for 20 payments). The task is to calculate the present value of the interest payments and the repayment lump sum. To do so, use Appendix A-2 and Appendix A-4 in your textbook. Find the column for 4% interest and the row for 20 periods. (The number of periods, n, is equal to 20, because there are 20 semiannual interest payments in the remaining 10 years until the bond matures.) You can use the following equation to determine the value of a bond (or bond selling price):

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Suppose you own a 30-year bond issued by CQ Telecommunications with a face value of $1,000 paying a...

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