A European band has a par value of 1600 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 ?
1 answer:
Answer:
Bond Price= 1,892.73
Step-by-step explanation:
Giving the following information:
Par value= 1,600
Cuopon= 1,600*0.045= 72
YTM= 3.2%
Number of years (n)= 19
<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= 72*{[1 - (1.032^-19)] / 0.032} + [1,600 / (1.032^19)]
Bond Price= 1,013.29 + 879.44
Bond Price= 1,892.73
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