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SWH Corporation issued bonds on January 1, 2004. The bonds had a coupon rate of 4.5%, with interest paid semiannually. The face value of the bonds is $1,000 and the bonds mature on January 1, 2014. What is the intrinsic value (to the nearest dollar) of an SWH Corporation bond on January 1, 2008 to an investor with a required return of 6%

Respuesta :

Answer:

The price or present value or intrinsic value of the bond is $925.34

Explanation:

given data

coupon rate = 4.5%

face value FV = $1,000

required return r = 6%

time = 6 year (2008 to 2014 )

solution

FV= 1,000

we get here PMT that is

PMT =  1,000 × 4.5% ÷ 2 = 22.5

NPER = 6× 2 = 12

rate = 6% ÷ 2 = 3%

put value in excel formula we get

The price or present value or intrinsic value of the bond is $925.34

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