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marin [14]
3 years ago
7

A European bond has a par value of 1000 Euros, a coupon rate of 4.5 percent and a yield to maturity of 3.2 percent. The bond has

19 years to maturity. Coupons are made annually. What is the value of the bond?
Mathematics
1 answer:
Katyanochek1 [597]3 years ago
3 0

Answer:

Bond Price​= 1,182.96

Step-by-step explanation:

Giving the following information:

Par value= 1,000

Cuopon= 1,000*0.045= 45

YTM= 3.2%

Number of years (n)= 10

<u>To calculate the price of the bond, we need to use the following formula:</u>

Bond Price​= cupon*{[1 - (1+i)^-n] / i} + [face value/(1+i)^n]

Bond Price​= 45*{[1 - (1.032^-19)] / 0.032} + [1,000 / (1.032^19)]

Bond Price​= 633.31 + 549.65

Bond Price​= 1,182.96

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