Exhibit 11.1
Use the Information Below for the Following Problem(S)
A major retailer is reevaluating its bonds since it is planning to issue a new bond in the current market. The firm's outstanding bond issue has 8 years remaining until maturity. The bonds were issued with a 6.5 percent coupon rate (paid quarterly) and a par value of $1,000. The required rate of return is 4.25 percent.
-Refer to Exhibit 11.1.What will be the value of these securities in one year if the required return is 7 percent?
A) $970.14
B) $388.13
C) $1031.15
D) $1035.81
E) $972.52

Question

Quizplus · Accepted Answer

$$P = 16.25 \left[ \frac { 1 - \frac { 1 } { ( 1 + .0175 ) ^ { 28 } } } { .0175 } \right] + \frac { 1000 } { ( 1 + .0175 ) ^ { 28 } } = \$ 972.51$$

Exhibit 11.1 Use the Information Below for the Following Problem(S)