|
Question 1206996: To expand its business, Kingston Outlet Factory would like to issue a bond with par value of
₱1,000, coupon rate 10%, and maturity of 10 years. Calculate the bond amount given each of the
required rate of return.
a. 85%? b. 10%? c. 12%
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! par value of the bond is 1000
coupon rate is 10% per year.
maturity is 10 years.
if the required rate is 8.5%, the price of the bond will be 1098.42.
if the required rate is 10%, the price of the bond will be 1000.
if the required rate if 12%, the price of the bond will be 887.
this was found using the bond price calculator at https://www.fncalculator.com/financialcalculator?type=bondCalculator
here's a result from the calculator at 8.5%.
you fill in the inputs and click on price.
to do the other rates, leave the other inputs as is and change the rate to 10 and 12 respectively.
there are financial formulas that allow you to do this manually, using a stand alone calculator, but i wouldn't bother doing that unless you are required to.
the results will be, and should be, the same as provided by the calculator.
annual coupon rate of 10% is based on the face value of the bond = .10 * 1000 = 100.
|
|
|
| |
