Project #929 - Bond value YTM


1.     What is meant by the intrinsic value of a bond?  How is intrinsic value used (by bond investors) to determine whether to buy or sell a bond?

 

2.     What effect does the use of semiannual discounting have on the value of a bond in relation to annual discounting?

Hint:

You may want to calculate the value of the following bond using both annual and semiannual discounting to illustrate your answer: 

·       Face value: $1,000

·       Coupon rate: 5% (annual)

·       Maturity: 5 years

·       Investor’s required rate of return: 8%

Subject Mathematics
Due By (Pacific Time) 10/06/2012 12:00 pm
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