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A bond that pays 9% Interest compounded annually on a $1,000 face value will mature in 16 years. The interest rate is now 11%
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Answer #1

Face Value = $1,000

Annual Coupon Rate = 9.00%
Annual Coupon = 9.00% * $1,000
Annual Coupon = $90

Time to Maturity = 16 years
Annual Interest Rate = 11.00%

Current Price = $90 * PVFA (11.00%, 16) + $1,000 * PVF (11.00%, 16)
Current Price = $90 * 7.3792 + $1,000 * 0.1883
Current Price = $852.43

So, the market price of the bond is $852.43

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