Answer:
You can sell the bond for $1,008.78 today
Explanation:
We need to calculate current value of the bond & its coupon
Face value: $1,000
Left tenor: 20 years (= 30 years to maturity - 10 years ago)
Coupon rate: 5%
Yield to maturity: 4.93%
Total coupon to be paid every year= $1,000* 5% = $50
To calculate the current value of coupon received in every of 20 years, we use formula PV in excel or manually as below:
PV = 50/(1+4.93%)^20 + 50/(1+4.93%)^19+.... +50/(1+4.93%)^1 = $626.83
The current value of face value after 20 years = $1,000/(1+4.93%)^20 = $381.95
So the value of bond = $626.83 + $381.95 = $1,008.78
