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An investor is considering the purchase of a $1000 par value bond with an 8% coupon...

An investor is considering the purchase of a $1000 par value bond with an 8% coupon rate (with interest paid semiannually) that matures in 5 years. If the bond is priced to yield 6%. What is the bonds current price?

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Answer #1
Period Cash Flow Discounting Factor
[1/(1.03^year)]		 PV of Cash Flows
(cash flows*discounting factor)
1 40 0.970873786 38.83495146
2 40 0.942595909 37.70383637
3 40 0.915141659 36.60566637
4 40 0.888487048 35.53948192
5 40 0.862608784 34.50435138
6 40 0.837484257 33.49937027
7 40 0.813091511 32.52366045
8 40 0.789409234 31.57636937
9 40 0.766416732 30.65666929
10 40 0.744093915 29.7637566
10 1000 0.744093915 744.0939149
Price of the Bond =
Sum of PVs		 1085.302028
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