Answer to Question #28409 in Finance for gul

Question #28409

On 1st July 1998 MBS Company issued 1 000 ten year bond with a face value of $10 000 each. The coupon rate was 10% and the risk adjusted required rate of return at the time of sale was 9%. Interest payments are to be paid each first of July. An original investor who bought ten bonds now needs money and is going to sell the bond on 2nd July 2002. At the time of resale, other 2001 new issue bonds will be offering a 7% coupon rate and the risk adjusted required rate of return is expected to be 8%.

What is the resale value of MBS Company bonds to the original investor?

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