1 answer

A Moving to the next question prevents changes to this answer. Question 6 What is the...

Question:

A Moving to the next question prevents changes to this answer. Question 6 What is the value of a bond that has a par value of

A Moving to the next question prevents changes to this answer. Question 6 What is the value of a bond that has a par value of 1,000, a coupon rate of 8.75% (annually), and matures in 12 years? Assume a yield-to-maturity of 11.50%. $825.63 $867.44 $936.59 $1,025.47 O $1,199.42 A Moving to the next question prevents changes to this answer. earch 3

Answers

We have to find the present price of a bond

Price= coupon amount *PVIFA(@12 YEARS,11.5% YTM)+FACE VALUE* PVIF(@12 YEARS,11.5% YTM)

PVIFA=(1/YTM) *(1-(1+YTM)^-YEARS)

PVIF=1/(1+YTM)^YEARS

COUPON AMOUNT=FACE VALUE* COUPON RATE

=1000*8.75%=87.5

PVIFA=(1/0.115)*(1-(1+0.115)^-12)

PVIFA= 6.34058

PVIF= 1/1.115^12=0.27083

Price=87.5*6.34058 +1000*0.27083

for simplicity i have written down some decimals only but calculations have been done withount roundings.

PRICE=$825.63

.

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