Problem:
Barkley Corporations has a bond issue outstanding with an annual coupon rate of 7% and 4 years remaining until maturity. The par value of the bond is $1,000.
Required:
Question 1: What is the price of the bond if present market conditions justify a 14% required rate of return? The bond pays interest annually.
Question 2: What would be the current value of the bond if the bond has a semiannual coupon?
Question 3: Assume an annual coupon but 20 years remaining to maturity. What is the current value under these conditions? Also, what is the bond's current yield?
Note: Please show how to work it out.