The Garcia Company’s bonds have a face value of $1,000, will mature in 10 years, and carry a coupon rate of 16 percent. Assume interest payments are made semiannually. |
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a. Determine the present value of the bond’s cash flows if the required rate of return is 16 percent. |
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b. How would your answer change if the required rate of return is 12 percent? | |||||

Answers: |
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Enter the answers in blue shaded cells | |||||

Step 1: |
a. PV 16% rate of return |
b. PV 12% rate of return |
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Coupon Rate | F | F | |||

Years to maturity | F | F | |||

Number of coupon payments per year | F | F | |||

Par Value | F | F | |||

Market Rate | F | F | |||

Step 2: |
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Compute periodic interest rate | C | C | |||

Compute number of periods | C | C | |||

Compute coupon cash flow | C | C | |||

Step 3: |
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Bond price (use PV) | C | C |

Subject | Business |

Due By (Pacific Time) | 10/02/2015 02:00 pm |

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