The Metchosin Corporation has two different bonds currently outstanding. Bond M has a face value of $40,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $2,500 every six months over the subsequent eight years, and finally pays $2,800 every six months over the last six years. Bond N also has a face value of $40,000 and a maturity of 20 years; it makes no coupon payments over the life of the bond. The required return on both these bonds is 8% compounded semiannually, what is the current price of bond M and bond N?

we must first calculate the effective interest rate:

the effective interest rate = 1.08 = (1 + r)²

√1.08 = √(1 + r)²

1.03923 = 1 + r

r = 3.923%

I used an excel spreadsheet to calculate the present value of bond M's coupon payments.

Bond M's price:

PV of face value = $40,000 / (1.03923)⁴⁰ = $8,582.09

PV of coupon payments = $27,449.05

market price = $36,031.14

to determine the market value of bond N (zero coupon bond) we can use the following formula:

market value = future value / (1 + r)ⁿ

market price = $40,000 / (1.03923)⁴⁰ = $8,582.09

1) the stages a new product goes through from beginning to end, i.e., the stages that a product passes through from introduction through growth, maturity, and decline. 2) the time from initial research and development to the time at which sales and support of the product to customers are withdrawn. 3) the period of time during which a product can be produced and marketed profitably.

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