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2 July, 14:36

Grossnickle corporation issued 20-year, noncallable, 7.5% annual coupon bonds at their par value of $1,000 one year ago. today, the market interest rate on these bonds is 5.5%. what is the current price of the bonds, given that they now have 19 years to maturity?

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  1. 2 July, 17:41
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    Bond valuation:

    Par value = Maturity value = FV = $1,000

    Coupon rate = 7.5%

    Years to maturity = N = 19

    Required rate = I/YR = 5.5%

    (Coupon rate) (Par value) = PMT = $75

    PV = $1,232.15
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