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amm1812
3 years ago
12

A government bond issued in France has a coupon rate of 5% (paid annually) and a face value of 100 euros, and it matures in 5 ye

ars. Calculate the price of the bond (in euros) if the yield to maturity is 3.5%.
Business
1 answer:
Nina [5.8K]3 years ago
8 0

Answer:

Bond Price​= 106.77

Explanation:

Giving the following information:

Face value= 100

Coupon= 100*0.05= 5

Yield To Maturity= 0.035

Years to maturity= 5 years

<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​= 5*{[1 - (1.035^-5)] / 0.035} + [100/(1.035^5)]

Bond Price​= 22.57 + 84.2

Bond Price​= 106.77

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