Business, 02.04.2020 02:00, taytay111293

Regatta, Inc., has six-year bonds outstanding that pay an 8.25 percent coupon rate. Investors buying the bond today can expect to earn a yield to maturity of 6.875 percent. How much will you be willing to pay for Regatta's bond today

Answers: 2

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answered: hfleysher

Price of bond= $1,065.79

Explanation:

The price of a bond is the present value of the expected interest payments plus the present value of the redemption value(RV)

Price of a bond = PV of Interest payment + PV of RV

PV of Interest payment

Interest payment = 8.25%× 1000 = 82.5

PV of interest payment

PV = A × (1- (1+r)^(-n)/r

A- interests payment, r - yield to maturity, r - year to maturity

A- 82.5, r- 6.875% , n- 6

PV of interest = 82.5× (1-(1.06875)^(-6))/0.06875 = 394.7615956

PV of RV

PV = RV × (1+r)^(-n)

RV - Redemption value, r- yield to maturity, n - year to maturity

PV of RV = 1000 × (1.06875)^(-6) = 671.0320037

Price = 394.76+ 671.03

Price = $1,065.79

answered: kerriscaballero12

Price of bond = $1,065.79

Explanation:

Calculating the price of the bond, we use

Price of a bond = PV of Interest payment + PV of RV

Let's calculate the interest payment first as;

Interest payment = 8.25%× 100 = 82.5

PV of interest payment is calculated using this formula

PV = A × (1- (1+r)^(-n)/r

Where

A = interests payment = 82.5

r = yield to maturity = 6.875%

n = year to maturity = 6

Substituting the values, we

PV of interest = 82.5× (1-(1.06875)^(-6))/0.06875

PV of interest = 394.7615956

PV of Redemption value is been calculated using this formula

PV = RV × (1+r)^(-n)

Where ;

RV = Redemption value = 1000

r = yield to maturity = 0.06875

n = year to maturity = 6

Substituting the values in to the formula

PV of Redemption value = 1000 × (1.06875)^(-6)

PV of Redemption value = 671.0320037

Finally

Price of bond = PV of Interest payment + PV of RV

Price of bond = 394.76+ 671.03

Price of bond = $1,065.79

answered: Guest

typically a loft will include modern kitchen and bathrooms, this increases the price tag. lofts also have a good amount of open space, this requires more heating and electricity. lofts are also in older buildings, this means that maintaining the location increases the bill. keep in mind this is without talking about the high state and property taxes.

i hope this you! : )

answered: Guest

Ibelieve it would be choice a ($24,630)

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Regatta, Inc., has six-year bonds outstanding that pay an 8.25 percent coupon rate. Investors buying...