
Question content area top
Part 1
Bond valuationlong dash
Annual 
interest   Calculate the value of the bond shown in the following​ table, assuming it pays interest annually. 
 ​(Click on the icon here    
in order to copy the contents of the data table below into a​ spreadsheet.)
Par value
	
Coupon interest rate
	
Years to maturity
	
Required return
​$1 comma 000
11
​%
	
20
12
​%
Question content area bottom
Part 1
The value of the bond is ​$enter your response here
. 
 ​(Round to the nearest​ cent.)

To calculate the value of a bond, we can use the bond valuation formula:

\[
\text{Bond Value} = \sum_{t=1}^{n} \frac{C}{(1 + r)^t} + \frac{F}{(1 + r)^n}
\]

Where:
- $ C $ is the coupon payment = $ \text{Par Value} \times \text{Coupon Interest Rate} $
- $ F $ is the face value (par value) of the bond.
- $ r $ is the required return (or yield).
- $ t $ is the number of years.
- $ n $ is the number of years to maturity.

Given the data from the problem:
- Par Value $ F = 1000 $
- Coupon Interest Rate = 11%
- Years to Maturity $ n = 20 $
- Required Return $ r = 12\% $

First, let's calculate the annual coupon payment $ C $:

\[
C = \text{Par Value} \times \text{Coupon Rate} = 1000 \times 0.11 = 110
\]

Now, we calculate the bond value using the two components: the present value of the coupon payments and the present value of the par value.

We can calculate this directly.The value of the bond is approximately **$925.31**.

Would you like further details or have any questions?

Here are 5 related questions to explore:
1. How does the required return affect bond value?
2. What happens to the bond value if the coupon rate changes to 10%?
3. What is the bond's value if the required return is 11% instead of 12%?
4. How do you calculate the bond's yield to maturity?
5. How does the number of years to maturity influence the bond's value?

**Tip:** A bond's price is inversely related to interest rates; as interest rates rise, bond prices fall, and vice versa.

Calculate the value of the bond shown in the following table, assuming it pays interest annually. Par value: $1,000, Coupon interest rate: 11%, Years to maturity: 20, Required return: 12%. What is the value of the bond? (Round to the nearest cent.)

Learn how to calculate the value of a bond with a par value of $1,000, an 11% coupon interest rate, 20 years to maturity, and a required return of 12%. This detailed guide covers key concepts in bond valuation and finance using the time value of money and discounted cash flow formula.

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