If a 3-year bond carries an 8% coupon rate, and market rate of return associated with...
If a 3-year bond carries an 8% coupon rate, and market rate of return associated with a bond of its risk level and type is 10%, what should the bond sell for?
Homework Answers
| Price of bond is the present value of cash flow from bond which is calculated as follows: | ||||||||||
| Price of bond | = | =-pv(rate,nper,pmt,fv) | Where, | |||||||
| = | $ 950.26 | pv | = | Present value of cash flow | = | ? | ||||
| rate | = | Discount rate | = | 10% | ||||||
| nper | = | Number of period | = | 3 | ||||||
| pmt | = | Coupon payment | = | $ 80 | ||||||
| fv | = | Face value | = | $ 1,000 | ||||||
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If a 3-year bond carries an 8% coupon rate, and market rate of
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