The ARA Corporation bonds have a coupon of 14%, pay interest semi-annually,
and they will mature in...

Question

The ARA Corporation bonds have a coupon of 14%, pay interest semi-annually,
and they will mature in 7 years. Your required rate of return for such an investment is 10% annually. How much should you pay for a $1,000 ARA Corporation bond?If you are given RM90,000, how many units of bond can you purchase?What is the yearly interest income for this bond if I purchase it with RM90,000?

Sumit · Accepted Answer

Sheet1
	Face Value of the Bond	1000
	Time to Maturity	14	Semi-Annual Periods
	Coupon Rate	7%	Semi-Annual Periods
	Required Rate of Return 	5%	Semi-Annual Periods
	Market Value of Bond	$   505.76
	Hence you should pay $505.76 for a $1000 bond.
	Money to Invest	90000
	Price of one bond	$   505.

The ARA Corporation bonds have a coupon of 14%, pay interest semi-annually, and they will mature in 7 years. Your required rate of return for such an investment is 10% annually. How much should you...

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