Question

What must be the price of a $ 2 comma 000$2,000 bond with a 5.95.9% coupon rate, annual coupons, and 3030 years to maturity if YTM is 7.8 %7.8% APR? A. $ 1 comma 564.00$1,564.00 B. $ 1 comma 251.20$1,251.20 C. $ 2 comma 189.60$2,189.60 D. $ 1 comma 876.80$1,876.80

Answer 1

Information provided:

Future value= $2,000

Time= 30 years

Coupon rate= 5.9%

Coupon payment= 0.059*2,000= $118

Yield to maturity= 7.8%

The price of the bond is calculated by computing the present value.

The below must be entered in a financial calculator to calculate the present value of the bond:

FV= 2,000

N= 30

I/Y= 7.8

PMT= 118

Press the CPT key and PV to calculate the present value of the bond.

The value obtained is $1,564.

Therefore, the price of the bond is $1,564 and the answer is option a.

In case of any further queries, kindly comment on the solution.