Question

What would you pay for a $210,000 debenture bond that matures in 15 years and pays $10,500 a year in interest if you wanted to earn a yield of:?

Answer 1

Let's say you wanted to earn a yield of 8%. $210,000 x .31524 = $66, 200.4 +$10,500 x 8.55948 = $89, 874.54 Use the tables to find .31524 (which is 8% @ 15 periods for present value of 1) and 8.55948 (which is 8% @ 15 periods for present value of an ordinary annuity of 1) You would pay a total of $156, 074.94