Acme Co. issues a $1,000 face value bond that pays an annual coupon rate of 6.5 percent and matures in four years. Assuming a ma

Question

2 years ago

10

rket interest rate of 6.0 percent at the time of issuance, the bond's price is closest to

1 answer:

Olin [163] · Answer 1 · 2022-01-11T15:36:15+03:00

Answer:

$1,017.33

Explanation:

For computing the bond price we have to use the PV function that is shown in the attached spreadsheet which is presented below:

Given that,

Future value or face value = $1,000

Market Rate of interest = 6%

NPER = 4 years

PMT = $1,000 × 6.5% = $65

The formula is shown below:

= PV(Rate,NPER,PMT,FV,type)

So, after solving this, the answer would be $1,017.33