You purchase a 10 year, $1000 bond with a stated interest rate of 6.5%. Currently the...
Homework Answers
The Present Value of the Bond is the aggregate value of the Present Value of the coupon amounts plus the present value of the face value
Face Value = $1,000
Annual Coupon Amount = $65 [$1,000 x 6.50%]
Yield to Maturity (YTM) = 5.75%
Maturity Years = 10 Years
The Present Value of the bond = Present Value of the Coupon
payments + Present Value of Face Value
= $65[PVIFA 5.75%, 10 Years] + $1,000[PVIF 5.75%, 10 Years]
= [$65 x 7.44805] + [$1,000 x 0.57174]
= $484,.12 + $571.74
= $1,055.86
“Therefore, the Present Value of the Bond would be $1,055.86”
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