Question

Is this correct?

a.30 years

The annuity amount, A is $90 (9% on $1,000)

The yield to maturity, i is 12%

The future value of annuity, FV is $1,000

The maturity period, n is

30 years

( 1 ) 1

1 - ——— 1 - —————

(1+i)n 1 (1+0.12)30 1

Bond Price = Ax ———— + FV x ——- = $90 x ——————- + $1,000x ————

i (1+i)n 0.12. (1+0.12)30

= ($90 x 8.055184) + ($33.37792)

= $758.35

Therefore, the price of the bond is $883.42

Answer 1

Price of Bond =[PVA 12%,30*Annuity amount ] +[PVF 12%,30*Future value]

             = [8.05518*90]+ [.03338*1000]

             = 724.97+ 33.38

            = $ 758.35

**FInd the present value factor using the formula 1/(1+i)^n or from present value table at 12% ,30 periods

find the present value annuity factor from present value table