Math Problem Statement
A company has bonds with 10-year maturity, 6.25% coupon rate with semi-annual payments, and par value of $1,000. The market interest rate is 7.75%. What is the bond’s price?
Solution
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Math Problem Analysis
Mathematical Concepts
Present Value
Bond Pricing
Discounting Cash Flows
Formulas
Bond Price = (Sum(C/(1 + r)^t)) + (F/(1 + r)^T)
C = (Coupon Rate × Par Value)/2
r = Market Interest Rate/2
T = Number of Semi-Annual Periods
Theorems
Present Value Theorem
Suitable Grade Level
College Level (Finance/Mathematics)
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