Question

• Consider a 10-year, $100,000 Face Value bond with a 5% coupon rate and annual coupons.

• If the yield to maturity is constant at 4%, what is the bond’sfair market price

• Answer given in the answer key is: 69,227.16 however I keep getting 108,1108.8958

Answer 1

Bond Par Value = $100,000

Time Period = 10 years

Coupon rate = 5%

YTM = 4%

Calculating Bond Price,

Using TVM Calculation,

PV = [FV = 100,000, PMT = 5,000, N = 10, I = 0.04]

PV = $108,110.90

Bond Price = $108,110.90