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Calculate the value of bond D shown in the following table, all of which pay interest semiannually. <image 1> | The correct answer is $1,245.99. First, calculate the semiannual coupon payment: $1,000 x 14% / 2 =$70 Next, calculate the number of semiannual periods: 10 years x 2 = 20 periods Then, calculate the present value of the coupon payments using the formula: PV = C x [1 - (1 + r)^-n] / r where: C = semiannual coupon payment r = semiannual interest rate n = number of semiannual periods PV = $70 x [1 - (1 + 0.10 / 2)^-20] / 0.10 / 2 PV =$70 x [1 - (1.05)^-20] / 0.05 PV = $70 x [1 - 0.37689] / 0.05 PV =$70 x 0.62311 / 0.05 PV = $872.35 Finally, calculate the present value of the bond: PV of bond = PV of coupon payments + PV of principal PV of bond = $872.35 +$1,000 PV of bond = $1,872.35 Therefore, the value of bond D is $1,872.35. Expected Answer: 1249 Difficulty: Medium Subfield: Managerial Finance |

- Input ID
- a9f9e161-f52e-4b90-b7c5-f8171c1458b6
- Created
- February 21, 2024
- Permission
- Public