Question
In: Finance
A bond with 13 years to maturity and a coupon rate of 4% has a par,...
A bond with 13 years to maturity and a coupon rate of 4% has a par, or face, value of $18,000. Interest is paid annually. If you require a return of 10% on this bond, what is the value of this bond to you? (in absolute value)
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Expert Solution
Answer)
| Par Value | $18000 |
| Coupon Rate | 4% |
| Years | 13 |
| Required Rate | 10% |
Annual Coupon = 4% of 18000
Annual Coupon = $720
Price of the Bond = Interest x PVIFA(10%,13) + FV x PVIF(10%,13)
Price of the Bond = 720 x 7.10 + 18000 x 0.2897
Price of the Bond = 5112 + 5215
Price of the Bond = $10327
jeff jeffy answered 2 years agoRelated Solutions
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