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In: Finance

. A 20-year, $1,000 par value bond has a 7% annual payment coupon. The bond currently...

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A 20-year, $1,000 par value bond has a 7% annual payment coupon. The bond currently sells for $780. If the yield to maturity remains at the current rate, what will the price be 10 years from now?

Solutions

Expert Solution

We have to solve this problem in two step . First we have to compute YTM or current rate
and there after bond price after 10 yea
we have to use financial calculator to solve this problem
Put in calculator
FV 1000
PMT 1000*7% 70
PV -780
N 20
Compute I 9.50%
Now using this rate of 9.5% we have to compute value of bond after 10 year(Means 10 year left to maturity 20 year -10 year)
we have to use financial calculator to solve this problem
Put in calculator
FV 1000
PMT 1000*7% 70
I 9.50%
N 10
Compute PV ($843.27)
therefore bond value after 10 year = $843.27

jeff jeffy answered 2 years ago
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