Hi all,
I just have a small question for those who are knowledgeable about bonds. Right now I'm working on an assignment for a course in financing and I'm stumped.
The question reads:
A bond with a par value of $10,000 is redeemable at 106 in 25 years. The coupon rate is 8% semi-annually. What is the purchase price of the bond to yield 10% compounded semi-annually?
My dilemma is:
what does "redeemable at 106" mean? I'm familiar with the phrase "redeemable at par," but I'm not sure what this means. I'm guessing that the redemption value is something other than $10,000. Is it redeemable at (1.06)*(10000) or am I way off? any help is appreciated.
I just have a small question for those who are knowledgeable about bonds. Right now I'm working on an assignment for a course in financing and I'm stumped.
The question reads:
A bond with a par value of $10,000 is redeemable at 106 in 25 years. The coupon rate is 8% semi-annually. What is the purchase price of the bond to yield 10% compounded semi-annually?
My dilemma is:
what does "redeemable at 106" mean? I'm familiar with the phrase "redeemable at par," but I'm not sure what this means. I'm guessing that the redemption value is something other than $10,000. Is it redeemable at (1.06)*(10000) or am I way off? any help is appreciated.
