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What is the price of a 40 year 4% bond? Suppose similar bonds have a yield...
What is the price of a 40 year 4% bond? Suppose similar bonds have a yield to maturity of 5%
Solutions
Expert Solution
| Computation Of Bond Price | ||
| a | Annual Coupon Amount | $ 40.00 |
| b | Present Value Annuity Factor for (40 Years,5%) | 17.159086 |
| c | Present Value Of Annual Interest (a*b) | $ 686.36 |
| d | Redemption Value | $ 1,000.00 |
| e | Present Value Of (40 Years,5%) | 0.14205 |
| g | Present Value Of Redemption Amount (d*e) | $ 142.05 |
| f | Bond Price(c+g) | $ 828.41 |
jeff jeffy answered 2 years agoRelated Solutions
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Group of answer choices
1.22%
1.34%
1.10%
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