"How much would an investor expect to pay for a $1,000 par value bond with a 9% annual coupon that matures in 5 years if the int

Question

3 years ago

11

erest rate is 5%

1 answer:

SVEN [57.7K] · Answer 1 · 2022-07-01T04:54:09+03:00

Answer:

The answer is $1,173.18

Explanation:

N(Number of periods) = 5 years

I/Y(Yield to maturity) = 5percent

PV(present value or market price) = ?

PMT( coupon payment) = $90 ( 9percent x $1,000)

FV( Future value or par value) = $1,000.

We are using a Financial calculator for this.

N= 5; I/Y = 5; PMT = 90; FV= $1,000; CPT PV= -1,173.18

Therefore, the market price of the bond is $1,173.18