Question

Bond E has the following features: Face value = $1,000, Coupon Rate = 7%, Maturity =...

Bond E has the following features: Face value = $1,000, Coupon Rate = 7%, Maturity = 5 years, Yearly coupons The market interest rate is 3.09% If interest rate remains at 3.09% for the life of the bond (i.e., 3.09 years), what is the price of Bond E in year 2?

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Answer #1

  

_______________________________

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Value of Bond in year 2 =

Where r is the discounting rate of a compounding period i.e. 0.0309

And n is the no of Compounding periods 3 years

Coupon 7%

=

= $1110.41

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