What is the value of a bond that pays a 6% semiannual coupon, has a face value of $1,000, matures in 20 years, and has a yield to maturity of 8%?
Question 45 options:
$803.64 

$808.43 

$805.12 

$802.07 
Information provided:
Face value= future value= $1,000
Time= 20 years*2= 40 semiannual periods
Coupon rate= 6%/2= 3%
Coupon payment= 0.03*1,000= $30 per semiannual period
Yield to maturity= 8%/2= 4% per semiannual period
The value of the bond is calculated by computing the present value.
Enter the below in a financial calculator to compute the present value:
FV= 1,000
PMT= 30
I/Y= 4
N= 40
Press the CPT key and PV to compute the present value.
The value obtained is 802.07.
Therefore, the value of the bond is $802.07.
Hence, the answer is option d.
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