As with most bonds, consider a bond with a face value of $1,000. The bond's maturity...

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As with most bonds, consider a bond with a face value of $1,000. The bond's maturity...

As with most bonds, consider a bond with a face value of $1,000. The bond's maturity is 6 years, the coupon rate is 12% paid annually, and the discount rate is 11%.

What should be the estimated value of this bond in one year?

business finance

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Answer 1

Answer #1

Price of the bond=Face or Par Value*Coupon rate/discount rate*(1-1/(1+discount rate)^t)+Face or Par Value/(1+discount rate)^t

If yield remains constant the price of the bond=1000*12%/11%*(1-1/1.11^5)+1000/1.11^5=1036.9589702

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Answer 2

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