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NemiM [27]
3 years ago
5

A 3-year bond with 10% coupon rate and $1,000 face value yields 8% yield to maturity. Assuming annual coupon payment, calculate

the price of the bond.
Business
1 answer:
NNADVOKAT [17]3 years ago
6 0

Answer: $1051.51

Explanation:

Coupon rate = 10%

Face value = $1,000

Yield to maturity = 8%

Annual coupon will be:

= Face value × Coupon rate

= 1000 × 10%

= 100

Therefore, the price of bond will be:

= Annual coupon × Present value of annuity factor + $1000 × Present value of the discounting factor

= (100 × 2.5771) + (1000*0.7938)

= 257.71 + 793.8

= $1051.51

The price of the bond is $1051.51

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