Problem:
A firm has a bond issue outstanding with 15 years to maturity and a coupon rate of 8%, with interest being paid semiannually. The firm has recently faced a corporate fraud scandal, and the required nominal rate on this debt has now risen to 16%.
Required:
What is the current value of this bond (assuming a face value of $1,000)? Please provide step by step solution and show all work.
A. $1,000
B. $1,273
C. $553.96
D. $549.69
E. $450.76