Question

Question 14 (1 point) Guggenheim, Inc. offers a 7 percent coupon bond with annual payments. The yield to maturity is 7.85 percent and the maturity date is 9 years. What is the market price of a $1,000 face value bond? OA) $742.66 OB) $946.57 OC) $868.67 OD) $1,078.73 O E) $869.67

Answer 1

Answer is $946.57

Face Value = $1,000

Annual Coupon Rate = 7.00%
Annual Coupon = 7.00% * $1,000
Annual Coupon = $70

Time to Maturity = 9 years
Annual YTM = 7.85%

Market Price = $70 * PVIFA(7.85%, 9) + $1,000 * PVIF(7.85%, 9)
Market Price = $70 * (1 - (1/1.0785)^9) / 0.0785 + $1,000 * (1/1.0785)^9
Market Price = $70 * 6.286042 + $1,000 * 0.506546
Market Price = $946.57