Question

What is the value of a bond with a par value of $1,000, a coupon rate of 9.25%, and a yield to maturity of 6.70%? The bond has 16 years to maturity. $1,265 $1,260 $1,323 $1,245 $1,173

Answer 1

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Statementshowing Computations
Statement showing bond's market price:
Particulars	Time	PVf @6.70%	Amount	PV
Cash Flows (Interest)	1.00	0.9372	92.50	86.69
Cash Flows (Interest)	2.00	0.8784	92.50	81.25
Cash Flows (Interest)	3.00	0.8232	92.50	76.15
Cash Flows (Interest)	4.00	0.7715	92.50	71.36
Cash Flows (Interest)	5.00	0.7231	92.50	66.88
Cash Flows (Interest)	6.00	0.6777	92.50	62.68
Cash Flows (Interest)	7.00	0.6351	92.50	58.75
Cash Flows (Interest)	8.00	0.5952	92.50	55.06
Cash Flows (Interest)	9.00	0.5579	92.50	51.60
Cash Flows (Interest)	10.00	0.5228	92.50	48.36
Cash Flows (Interest)	11.00	0.4900	92.50	45.32
Cash Flows (Interest)	12.00	0.4592	92.50	42.48
Cash Flows (Interest)	13.00	0.4304	92.50	39.81
Cash Flows (Interest)	14.00	0.4034	92.50	37.31
Cash Flows (Interest)	15.00	0.3780	92.50	34.97
Cash Flows (Interest)	16.00	0.3543	92.50	32.77
Cash flows (Maturity Amount)	16.00	0.3543	1,000.00	354.30
Fair Price				1,245.00
So correct answer is $1245