Present Value
Price of bond= 0.385543*1000 +6.144567*100= $385.54.64+$614.45
Price of bond= $1,000
So, price of bond B. is $1,000 b. For market interest rate equal to 12%:
Price for bond a:
Market interest rate is equal Coupon rate is equal Face value Frequency Number of years to maturity Number of Periods Discount rate annually Discount rate per period n, periods r, per period 12%
10% $1,000 Annual 20-20-12.00% annual 12.00% 20-12.00%
Now we need to calculate PVIF and PVIFA.
For calculation of PVIFA (i, n) and PVIF I is equal to 20 periods and n=12%
PVIF= 1/(1+0.12)^20
PVIF=0. 103667
PVIFA= (1- 1/(1+.12)^20)/.12
PVIFA=7.469444
Price of bond= 0.103667*1000+7.469444*100=$851
Price of bond a = $851
Price of bond B:
Market interest rate is equal Coupon rate is equal Face value Frequency Number of years to maturity Number of Periods Discount rate annually Discount rate per period n, periods r, per period 12%...
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