You own a 25-year, 6.4% annual coupon bond with $1,000 face value. If the yield to...

You own a 25-year, 6.4% annual coupon bond with $1,000 face value. If the yield to maturity is 3.3%, how much is it worth? Round to the nearest cent.

Expert Solution

Value of bond=coupon*present value annuity factor(years, yield)+face value*present value inflow factor(years, yield)

Coupon=$1000*6.4%=$64

Value=64*present value annuity factor(25 years, 3.3%)+1000*present value inflow factor(25 years, 3.3%)

=64*16.8451+1000*0.4441

=1078.09+444.1

=$1522.19

jeff jeffy answered 2 years ago

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