A security will pay a lump sum of $1000 in 8 years. There are no other...

Question

Question

A security will pay a lump sum of $1000 in 8 years. There are no other payments. If the yield to maturity is 4% then the price should be about:

Answer 1

Answer #1

Answer - price of bond = $730.69

Reason = price of bond is the present value of all the payments.

Price = payment ÷ ( 1 + 0.04 )^8

Price = 1000 ÷ 1.36856905038

Price = 730.69

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Answer 2

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