The 9-percent-coupon-rate bonds of the Melbourne Mining Company have exactly 15 years remaining to maturity. The current market value of one of these $1,000-parvalue bonds is $700. Interest is paid semiannually. Melanie Gibson places a nominal annual required rate of return of l4 percent on these bonds. What dollar intrinsic value should Melanie place on one of these bonds (assuming semiannual discounting)?

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2.37K viewsJanuary 1, 2017

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Darshita 6.14K January 1, 2017 0 Comments

The 9-percent-coupon-rate bonds of the Melbourne Mining Company have exactly

15 years remaining to maturity. The current market value of one of these $1,000-parvalue

bonds is $700. Interest is paid semiannually. Melanie Gibson places a nominal

annual required rate of return of l4 percent on these bonds. What dollar intrinsic value

should Melanie place on one of these bonds (assuming semiannual discounting)?

score 0 · Answer 1 · 2017-01-01T06:30:50+00:00

V = (I/2)(PVIFA7%, 30) + $1,000(PVIF7%, 30)

= $45(12.409) + $1,000(0.131)

= $558.41 + $131 = $689.41

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