Question

. W ith or the bond oncorsi Consider a bond with a coupon rate of 10% and annual coupons. The par value is 51,000, and the bond has 5 years to maturity. The yeld to maturity a. 880 b. 937 963 d. 984 e. 997 f. 1039 g. 1119.5 h 1023 Moving to another question will save this response

Answer 1

face value of debt =       1000  
Years (n) =       5  
Coupon rate=       10.00%  
coupon amount = 1000*10% =       100  
YTM (i) = 9% or       0.09  
          
Debt or bond price formula (present value of equal cash flows with maturity value) = Coupon amount * (1 - (1/(1+i)^n)/i + face value/(1+i)^n          
100*(1-(1/(1+0.09)^5))/0.09 + 1000/(1+0.09)^5          
1038.896513          
So, value of debt or present value of cash flows is        $1,039