Hello, can you answer this question? you have just purchased a 5-year, $1000 par value bond....
Hello, can you answer this question?
you have just purchased a 5-year, $1000 par value bond. the coupon rate on this bond is %12 , and the interest is paid annually. if you expect to earn a 10 percent yield to maturity on this bond, how much did you pay for it?
Homework Answers
Annual coupon=($1000*12%)=$120
Hence current price=Annual coupon*Present value of annuity factor(10%,5)+$1000*Present value of discounting factor(10%,5)
=$120*3.790786769+$1000*0.620921323
which is equal to
=$1075.82(Approx).
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