Bank of America has bonds that pay a coupon interest rate of 5.5 percent and mature...
Bank of America has bonds that pay a coupon interest rate of 5.5 percent and mature in 5 years. If an investor has a required rate of return of 7.9 percent, what should she be willing to pay for the bond? What happens if she pays more or less? a. The price she would be willing to pay for the bond is
Homework Answers
Answer:
Assume that Face Value of the Bond= 1000
Therefore Coupons payment = 1000*5.5% = 55
Maturity Value = 1000
Calculating Fv= 1000; PMT=55; Time= 5; I/Y= 7.9%,
We get PV= 903.92 (The price she would be willing to pay for the bond)
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