You are considering investing in a 20-year bond that has a coupon rate of 7% and a yield to maturity of 6.75%. The bond pays cou

Question

3 years ago

8

pons annually. What is the fair price of the bond

1 answer:

stich3 [128] · Answer 1 · 2022-08-02T13:20:03+03:00

Answer:

$1,027.01

Explanation:

We use the present value formula for this question. The attachment is shown below:

Given that,

Assuming Future value = $1,000

Rate of interest = 6.75%

NPER = 20 years

PMT = $1,000 ×7% = $70

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

So, after solving this, the fair price of the bond is $1,027.01