Answer:
Value of bond = €1,015.31
Explanation:
We know,
Value of bond = [I × ] + []
Given,
Face Value, FV = €1,000
Coupon payment, I = FV × coupon rate
I = €1,000 × 3.8% = €38
Interest rate, r = 3.7% = 0.037
Putting the values into the above formula,
Value of bond = [€38 × ] + (€1,000 ÷ )
or, Value of bond = [€38 × ] + €433.5993
or, Value of bond = (€38 × 15.3081) + €433.5993
or, Value of bond = €581.7088 + €433.5993
Therefore, Value of bond = €1,015.31