Answer:
The question requirement is found below:
a.Compute the price of a bond. (Do not round intermediate calculations and round your answer to 2 decimal places.)
b.Compute the total value of the 70 bonds. (Do not round intermediate calculations and round your answer to 2 decimal places.)
a. price of a bond is $829.73
b value of 70 bonds is $58,081.10
Explanation:
The price of the bond can be computed using the pv formula in excel as found below:
=-pv(rate,nper,pmt,fv)
rate is the yield to maturity on the bond which is 10% annually
nper is the number of annual coupon that the bond would pay before redemption,hence a 20 year bond would pay coupon interest 20 times before it is redeemed
pmt is the annual coupon,which is 8%*$1000=$80
fv is the face value of $1,000
=-pv(10%,20,80,1000)=$ 829.73
each bond is worth $829.73
70 bonds=70*$829.73 = $58,081.10
