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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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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 ago
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