In: Finance
An 8%, 8-year bond pays annual coupons and has 5 years to maturity. If the market interest rate is 9%, calculate the value of the bond. Show the (condensed) time line and key steps of two methods. For the NS method, show the abbreviated equation/expression.
Answer :
Annual Coupon Payment = $8
Adjusted Coupon Payment = $8
Number Payments = 5
Adjusted Market Rate = 9%
Present Value Paid at Maturity = $ 64.99
Present Value of Interest Payments = $31.12
Present Value of Bond = $96.11