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2 August, 20:39

The country inn has bonds outstanding with a par value of $1,000 each and a 6.6 percent coupon. the bonds mature in 7.5 years and pay interest semiannually. what is the current value of each of these bonds if the yield to maturity is 6.8 percent?

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  1. 2 August, 20:43
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    Given:

    Present Value = Par value of bond = $1000

    interest of bond = 6.6 %

    n = 7.5 years

    Semi-annual.

    The current value of the bond is determined by using this formula:

    Present Value = (Future Value / (1 + i) ^n)

    $1000 = FV / (1 + 0.066) ^7.5)

    Solve for FV

    FV = $1,615.02
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