You buy a 7% coupon bond maturing in 5 years. The bond has a $70 annual...

You buy a 7% coupon bond maturing in 5 years. The bond has a $70 annual coupon, $1,000 face value, and the promised annual coupon is $70. The market's required return on similar bonds is 7%. I know that the present value of the face value is $712.99. How would I calculate the present value of the coupon payments? I know it's $287.01, but what values would I put in a Texas Instruments BA II plus calculator to yield this?

Expert Solution

Assuming you are interested in not finding the price but finding only the present value of coupons

Using financial calculator
FV=0
I/Y=7%
N=5
PMT=-7%*1000
CPT PV=287.01

jeff jeffy answered 2 years ago

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