Question

In: Finance

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

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