Calculating fair value of a coupon paying bond


Question: A firm has an issue of $1,000 par value bonds with a 9% stated interest rate outstanding. The issue pays interest annually and has 20 years remaining to its maturity date. If bonds of similar risk are currently earning 11% the firms bond will sell for _________ today.

A. $840.67

B. $1,000.00

C. $1,123.33

D. $716.67

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Accounting Basics: Calculating fair value of a coupon paying bond
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