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Question

How do we calculate the issue price of bonds? Is it equal to the present value of the principal? Explain.

Solution

VerifiedAnswered 1 year ago

Answered 1 year ago

Step 1

1 of 2Issue price of bonds is computed with face amount, interest payment, market interest rate and number of periods to maturity by financial calculator, Excel or present value tables.

Issue price of bond is equal to present value of the principal only when stated interest rate is equal to market interest rate.

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