A bond with a $1,000 par value has a 4% annual coupon rate. Itwill mature...

A bond with a $1,000 par value has a 4% annual coupon rate. It will mature in 4 years, and annual coupon payments are made at the end of each year. Present annual yields on similar bonds are 3.5%. What is the current price?

Solutions

Expert Solution

Face Value of bond = $1000

Annual Coupon Bond = $1000*4%

= $40

No of years to maturity (n) = 4 years

Annual Yields(YTM) = 3.5%

Calculating the Price of Bond:-

Price = $146.924 + $871.44

Current Price of Bond= $1018.36

If you need any clarification, you can ask in comments.

jeff jeffy answered 2 years ago

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