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ivann1987 [24]
4 years ago
12

What is the price of a $1,000 par 9 year, annual bond with a 8.1% coupon rate and a yield to maturity of 6.3%? (Show your answer

to nearest cent with no comma. For example $1,378.565 is entered as 1378.57)
Business
1 answer:
sasho [114]4 years ago
4 0

Answer:

Price of the Bond is $1,120.85

Explanation:

Coupon payment = 1000 x 8.1% = $81

Number of years = n = 9 years

Yield to maturity = 6.3%

Price of bond is the present value of future cash flows, to calculate Price of the bond use following formula:

Price of the Bond = C x [ ( 1 - ( 1 + r )^-n ) / r ] + [ F / ( 1 + r )^n ]

Price of the Bond =$81 x [ ( 1 - ( 1 + 6.3% )^-9 ) / 6.3% ] + [ $1,000 / ( 1 + 6.3% )^9 ]

Price of the Bond = $81 x [ ( 1 - ( 1.063 )^-9 ) / 0.063 ] + [ $1,000 / ( 1.063 )^9 ]

Price of the Bond = $543.82 + $577.03

Price of the Bond = $1,120.85

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