Question

1. What is the price of a $1,000 face value bond with ten years to maturity if investors require a 7% return and the bond has a coupon rate of 10%?

Answer 1

Price of Bond = PV of Cash flows from it.

Year	CF	PVF @7%	Disc CF
1	$    100.00	0.9346	$      93.46
2	$    100.00	0.8734	$      87.34
3	$    100.00	0.8163	$      81.63
4	$    100.00	0.7629	$      76.29
5	$    100.00	0.7130	$      71.30
6	$    100.00	0.6663	$      66.63
7	$    100.00	0.6227	$      62.27
8	$    100.00	0.5820	$      58.20
9	$    100.00	0.5439	$      54.39
10	$    100.00	0.5083	$      50.83
10	$ 1,000.00	0.5083	$    508.35
Price of Stock			$ 1,210.71

Pls comment, if any further assistance is required.