What should be the price of a $1,000 par bond with a 3.8% annual coupon and...

Question

Question

What should be the price of a $1,000 par bond with a 3.8% annual coupon and 11 years to maturity with a required return of 7.2%?

business finance

Answer 1

Answer #1

price of coupon = Coupon payment per period * [1-(1+i)^-n]/i + par value/(1+i)^n

i = interest rate per period

n = number of periods

Price = 38 * [1-(1+7.2%)^-11]/7.2% + 1000/(1+7.2%)^11

= 747.57

choose C)

Answer 2

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