3. You are interested in purchasing a bond with no maturity date. The bond has a...
3. You are interested in purchasing a bond with no maturity date. The bond has a stated par value of $1,000 and a stated 3% coupon. Given the low level of risk that will be taken with the purchase, you require a return of only 5%. What is the maximum price you would pay to purchase the bond?
Homework Answers
Par value = $ 1000
N = ??
Interest rate (i) = 3%
r = 5%
Maximum price you would pay to purchase the bond = Coupon payment / r
= $ 30 / 0.05
= $ 600
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