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Calculate the value of a bond that matures in 19 years and has a $ 1,000 par value

Finance Dec 08, 2020

Calculate the value of a bond that matures in

19 years and has a $ 1,000 par value. The annual coupon interest rate is

14 percent and the? market's required yield to maturity on a? comparable-risk bond is

9 percent.

The value of the bond is how much?

Expert Solution

Computation of Value of Bonds using PV Function in Excel:

=-pv(rate,nper,pmt,fv)

Here,

PV = Value of Bonds = ?

Rate = 9%

Nper = 19 years

PMT = $1,000*14% = $140

FV = $1,000

Substituting the values in formula:

=-pv(9%,19,140,1000)

PV or Price of Bonds = $1,447.51

So, value of the bond is $1,447.51

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