Question

BSW Corporation has a bond issue outstanding with an annual coupon rate of 5.4 percent paid quarterly and four years remaining until maturity. The par value of the bond is $1,000. Determine the fair present value of the bond if market conditions justify a 11 percent, compounded quarterly, required rate of return. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

Answer 1

$820.74

Step-by-step explanation:

Rate = 11%/4 = 0.0275

Nper = 4*4 = 16

Pmt = 1000*5.4%*1/4 = $13.50

Fv = $1,000.00

Present value of bond = PV (Rate, Nper, Pmt, Fv)

Present value of bond = PV(0.0275, 16, 13.50, 1000)

Present value of bond = $820.74

So, the fair present value of the bond if market conditions justify a 11 percent, compounded quarterly is $820.74