Suppose there is a bond that matures in two years with a coupon rate of 10%...
Suppose there is a bond that matures in two years with a coupon rate of 10% each year. Given that
the principal of the bond is $3,000, and the economy interest rate is 2%, what is the present value of
this bond?
(a) $3,220
(b) $3,350
(c) $3,466
(d) $3,625
Homework Answers
Present value of bond = Present value of coupon + Present value of face value
= 300(P/A, 2%, 2) + 3000(P/F, 2%, 2)
= 300*1.9416 + 3000*0.96117
= $3,466
Select option C.
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