Question
In: Finance
Suppose the YTM is 5% for a 20-year $1000 bond with a 7% coupon rate and...
Suppose the YTM is 5% for a 20-year $1000 bond with a 7% coupon rate and annual coupon payments. Its bond price is $____.
Instruction: Type ONLY your numerical answer in the unit of dollars, NO $ sign, NO comma, and round to one decimal place. E.g., if your answer is $7,001.56, should type ONLY the number 7001.6, NEITHER 7,001.6, $7001.6, $7,001.6, NOR 7002. Otherwise, Blackboard will treat it as a wrong answer.
Solutions
Expert Solution
| Coupon Rate = 7% |
| Redemption Value = $1,000 |
| YTM = 5% |
| Computation of Price of Bond: |
| Price of Bond = Present Value of all future expected Reciepts |
| Price of Bond = Present Value of all Coupon payments + Present Value of Redemtion proceeds |
| Price of Bond = [($ 1,000*7%)* PVAF(5%, 20 years)] + [$1,000 * PV(5%, 20yr)] |
| Price of Bond = [$ 70* 12.4622] + [$1,000 * 0.3769] |
| Price of Bond = $ 872.35 + $ 376.89 |
| Price of Bond = 1249.24 |
jeff jeffy answered 2 years agoRelated Solutions
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