Question

Roca Corporation has an outstanding bond with a coupon rate of 8.0 percent that matures in 10 years. The bond pays interest semiannually. What is the market price of one $1,000 face value bond if the yield to maturity is 6.0 percent?

$1,039

$1,098

$993

$1,109

$1,149

Answer 1

Computation Of Bond Price
a	Semi-annual Interest Amount	$             40.00
	($1000*8%/2)
b	PV Annuity Factor for (20 Years,3%)	14.877475
c	Present Value Of Annual Interest (a*b)	$           595.10
d	Redemption Value	$       1,000.00
e	PV Factor Of (20 Years,3%)	0.55368
g	Present Value Of Redemption Amount (d*e)	$           553.68
f	Intrinsic Value ( Price ) Of The Bond (c+g)	$       1,149