Question

What is the value of a bond that has a par value of $1,000, a coupon rate of 10.71 percent (paid annually), and that matures in 23 years? Assume a required rate of return on this bond is 10.04 percent. Round the answer to two decimal places.

Answer 1

Value of a Bond
The Bond is usually valued based on discounting the future cash flows.
Future cash flows are coupon receipts and the principal amount
In the Present question :-
Principal	1000
Coupon rate	10.71%
Years	23
Required rate	10.04%
Yearly Interest	$107.10	(1000*10.71%)
Payment and Discounting Chart is as follows:-
1	0.9088	$107.10	$97.33
2	0.8258	$107.10	$88.45
3	0.7505	$107.10	$80.38
4	0.6820	$107.10	$73.04
5	0.6198	$107.10	$66.38
6	0.5632	$107.10	$60.32
7	0.5119	$107.10	$54.82
8	0.4652	$107.10	$49.82
9	0.4227	$107.10	$45.27
10	0.3841	$107.10	$41.14
11	0.3491	$107.10	$37.39
12	0.3172	$107.10	$33.98
13	0.2883	$107.10	$30.88
14	0.2620	$107.10	$28.06
15	0.2381	$107.10	$25.50
16	0.2164	$107.10	$23.17
17	0.1966	$107.10	$21.06
18	0.1787	$107.10	$19.14
19	0.1624	$107.10	$17.39
20	0.1476	$107.10	$15.80
21	0.1341	$107.10	$14.36
22	0.1219	$107.10	$13.05
23	0.1107	$1,107.10	$122.61
		TOTAL	$1,059.34
ANSWER:- Value of Bond is $1059.34

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