Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a face value of $ 1 comma 000,
and a coupon rate of 7.7 % (annual payments). The yield to maturity on this bond when it was issued was 5.7 %. What was the price of this bond when it was issued?
1 answer:
Answer:
The correct answer is $1,149.32.
Explanation:
According to the scenario, the computation of the given data are as follows:
Face value FV = $1,000
Coupon rate = 7.7%
So, Payment = 7.7% × $1,000 = $77
YTM (rate ) = 5.7%
Time period = 10 years
So, we can calculate the present value by using financial calculator:
The attachment is attached.
So, PV = $1,149.32
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