Question

A Ford Motor Co. coupon bond has a coupon rate of 7​% and pays annual coupons. The next coupon is due tomorrow and the bond matures 29 years from tomorrow. The yield on the bond issue is 6.45​%. At what price should this bond trade​today, assuming a face value of ​$1,000​?

Answer 1

Par/Face value	1000
Annual Coupon rate	0.07
Annual coupon	70
Present Value = Future value/ ((1+r)^t)
where r is the interest rate that is 6.45% and t is the time period in years.
price of the bond = sum of present values of future cash flows
r	0.0645
t	0	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18	19	20	21	22	23	24	25	26	27	28	29
future cash flow	70	70	70	70	70	70	70	70	70	70	70	70	70	70	70	70	70	70	70	70	70	70	70	70	70	70	70	70	70	1070
present value	70	65.75857	61.77414	58.03113	54.51492	51.21176	48.10875	45.19375	42.45538	39.88293	37.46635	35.1962	33.06359	31.06021	29.17821	27.41025	25.74942	24.18921	22.72354	21.34668	20.05325	18.83819	17.69674	16.62447	15.61716	14.67089	13.78195	12.94688	12.1624	174.6463
sum of present values	1141.353
The bond should trade today at $1141.35.