Question

A bond pays 10 coupons of $100 each and has a face value of $1000. The interest rate is 0.01.

What is the Bond Value?

Answer 1

Assume that the 10 coupons are paid in the following 10 years.
Present Value = Future value/ ((1+r)^t)
where r is the interest rate that is .01 and t is the time period
value of bond = sum of present values of future cash flows.
t	1	2	3	4	5	6	7	8	9	10
future cash flow	100	100	100	100	100	100	100	100	100	1100
present value	99.01	98.03	97.06	96.10	95.15	94.20	93.27	92.35	91.43	995.82
sum of present values	1852.42
The value of the bond is $1852.42.