Podunk Communications bonds mature in 6 1/2 years with a par value of $1,000.They pay a coupon rate of 9% with semi-annual payments.If the required rate of return on these bonds is 11% what is the bond's value?

Question

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The bond's value is calculated using the present value of its future cash flows, which include semi-annual coupon payments and the par value at maturity. With a coupon rate of 9%, the bond pays $45 every six months. The required rate of return is 11%, or 5.5% per period. The bond's value is the sum of the present value of these cash flows, which is approximately $908.83.

Podunk Communications Bonds Mature in 6 1/2 Years with a Par