Question

Bond X is noncallable and has 20 years to maturity, a 10% annual coupon, and a $1,000 par value. Your required return on Bond X is 11%; if you buy it, you plan to hold it for 5 years. You (and the market) have expectations that in 5 years, the yield to maturity on a 15-year bond with similar risk will be 9.5%. How much should you be willing to pay for Bond X today? (Hint: You will need to know how much the bond will be worth at the end of 5 years.) Do not round intermediate calculations. Round your answer to the nearest cent.

PLEASE SHOW WORK PLEASE. SHOW HOW IN CALCULATOR OR BASIC MATH STRUCTURE IF POSSIBLE. THANK YOU

Answer 1

Calculating Present Value of Bond,

Using TVM Calculation,

PV = [FV = 1,000, PMT = 100, N = 20, I = 0.11]

PV = $920.37

Bond Price = $920.37