Accounting


Accounting Forum

AccountingCoach.com is the world's largest free online accounting course.


Not signed in (Sign In)

Categories

Vanilla 1.1.7 is a product of Lussumo. More Information: Documentation, Community Support.

Welcome Guest!
Want to take part in these discussions? If you have an account, sign in now.
If you don't have an account, apply for one now.

General Accounting Discussions: Discounting bonds to present market rates

Bottom of Page

1 to 3 of 3

  1.  
    • CommentAuthorarnoldo
    • CommentTimeDec 16th 2009
     
    If a bond has a face value of 1000 and the rate is 4% and the current market rate is 9% how would you calculate buying this bond?
    • CommentAuthorArcSine
    • CommentTimeDec 17th 2009
     
    First determine the bond's cash flows. Most likely you've got coupon (interest) payments of either $40 once per year, or $20 every six months, plus a final maturity payment of $1,000.

    The current price of the bond will then be the present value of all those cash flows, when discounted at 9% per annum. (If the bond pays its coupon amounts every 6 months, be sure to use a 4.5% semiannual rate as your discount rate.)
  3.  
    Arcsine is rite and he gave you the correct answer of this problem!

1 to 3 of 3

  1.  



 

Why AccountingCoach.com?

the accounting coach

AccountingCoach.com is designed to help people without an accounting background easily understand accounting concepts at no cost.


By investing thousands of hours, we have created clear and concise accounting information for both business people and students of all ages.


We understand how difficult accounting can be. That's why we have ensured that each accounting topic includes a clear explanation, reinforcing drills, Q&A, puzzles, dictionary of terms, etc.


Read 1,440 Visitor Testimonials



What's on AccountingCoach.com?