1) You need to determine the market value of a $1,000 face value bond maturing in...

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Question

1) You need to determine the market value of a $1,000 face value bond maturing in...

1) You need to determine the market value of a $1,000 face value bond maturing in 5 years. The market yield (interest rate) for this type of bond is 3.1%. What is its market value? (Round to the nearest penny).

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Answer 1

Answer #1

Market price = Face value/ (1+r)ⁿ

r = Interest rate = 3.1% = 0.031

n = 5 years

face value = 1000

Market price = 1000/(1+0.031)⁵

Market price = 1000/1.165

Market price = 858.37$

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Answer 2

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