This is Business finance related question I need assistance in this question.
Q. ABC Company has outstanding Rs.1,000 face–value bond with a 15 percent coupon
rate and 6 years remaining until final maturity. Interest payments are made annually.
What would be the value of this bond if your nominal annual required rate of return
is as follows?
i) 12 percent
ii) 15 percent
iii) 18 percent?
Coupons are som commonly semi-annual that it is a safe assumption in the absence of useful information.
A 15% coupon, paid semi-annually, then: 1000*(0.15/2) = 75
"6 years remaining" is a little tricky. Let's assume a coupon payment was just made. There are then 12 coupons and the final asset sale to calculate the present value at each interest rate.
Let's see what you get.