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A 30-year German government bond (bund) has a face value of €100 and a coupon rate...

A 30-year German government bond (bund) has a face value of €100 and a coupon rate of 5% paid annually. Assume that the interest rate (in euros) is equal to 8.00% per year. What is the bond's PV? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

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Answer #1

Answer:

Face Value = € 100

Annual Coupon Rate = 5.00%
Annual Coupon = 5.00% * € 100
Annual Coupon = € 5

Annual Interest Rate = 8.00%
Time to Maturity = 30 years

Present Value = € 5 * PVIFA(8.00%, 30) + € 100 * PVIF(8.00%, 30)
Present Value = € 5 * (1 - (1/1.08)^30) / 0.08 + € 100 / 1.08^30
Present Value = € 66.23

So, current price of the bond is € 66.23

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