Question

A $1,000-par value bond issued by Verizon has a coupon rate of 9.5%. The bond has...

A $1,000-par value bond issued by Verizon has a coupon rate of 9.5%. The bond has 20 years left to maturity and the market’s required yield to maturity for similarly rated debt was 6.5%. What is the value of the bond? I'm trying to use Present value on excel but I am getting - $762.96 which is wrong.

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Answer #1

Value of Bond =

Where r is the discounting rate of a compounding period i.e. 6.5% =

And n is the no of Compounding periods 20 years  

Coupon 9.5%

=

= 1046.75818858 + 283.79702886

= $ 1330.56

Value of Bond is $ 1330.56

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