END-OF-CHAPTER STUDY PROBLEMS
7-1.
Value (Vb) =
Using a financial calculator, we find the value of the bond to be $1,105.94:
20
7
80
1,000
ANSWER -1,105.94
If you pay more for the bond, your required rate of return will not be satisfied. In other words, by paying an amount for the bond that exceeds $1,105.94, the expected rate of return for the bond is less than the required rate of return. If you have the opportunity to pay less for the bond, the expected rate of return exceeds…

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