Question

29. A coupon bond that pays interest annually has a par value of $1,000, matures in 5 years, and has a yield to maturity of 10%. The intrinsic value of the bond today will be ______ if the coupon rate is 7%.

A) $712.99

B) $620.92

C) $1,123.01

D) $886.28

E) $1,000.00

30. A coupon bond that pays interest annually, has a par value of $1,000, matures in 5 years, and has a yield to maturity of 10%. The intrinsic value of the bond today will be _________ if the coupon rate is 12%.

A) $922.77

B) $924.16

C) $1,075.82

D) $1,077.20

Answer 1

29. FV = 1,000

PMT = 1,000 * 0.07 = 70

I/Y = 10

N = 5

CPT PV

PV = $886.28

Option D is correct: $886.28

30. FV = 1,000

N = 5

I/Y = 10

PMT = 1,000 * 0.12 = 120

CPT PV

PV = $1075.815735

Option C) is correct: $1075.82