Question
In: Finance
Bond Prices A $1,000 par bond that pays interest semiannually has a quoted coupon rate of...
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Bond Prices A $1,000 par bond that pays interest semiannually has a quoted coupon rate of 4%, a promised yield to maturity of 3.5% and exactly 12 years to maturity. The present value of the coupon stream represents ______ of the total bond's value. |
A.)37.1%
B.)38.2%
C.)39.5%
D.)36.0%
Solutions
Expert Solution
Calculate the present value of the bond as follows:
Therefore, the present value of the bond is $1,048.65.
----------------------------------------------------------------------------------------------------------------------------------------
Calculate the present value of coupon payments as follows:
Therefore, the present value of coupon payment is $389.21.
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Calculate the present value of coupon payments as follows:
% value = (Present value of coupon) / Present value of the bond
= $389.21 / $1,048.65
= 37.1%
Therefore, the % value is 37.1%.
Therefore, Option A is correct.
jeff jeffy answered 1 year agoRelated Solutions
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