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?

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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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