Bond Valuation
Assume the following information for an existing bond that provides annual coupon payments:
Par value ¼ $1,000
Coupon rate ¼ 11%
Maturity ¼ 4 years
Required rate of return by investors ¼ 11%
a. What is the present value of the bond?
b. If the required rate of return by investors were 14 percent instead of 11 percent, what would be the present value of the bond?
c. If the required rate of return by investors were 9 percent, what would be the present value of the bond?
Bond Valuation