Question

A 21-year German government bond (bund) has a face value of €550 and a coupon rate...

A 21-year German government bond (bund) has a face value of €550 and a coupon rate of 4% paid annually. Assume that the interest rate (in euros) is equal to 7.10% per year. What is the bond's PV? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Present value            €

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Answer #1

Information provided:

Face value= future value= $550

Time= 21 years

Coupon rate= 4%

Coupon payment= 0.04*550= $22

Yield to maturity= 7.10%

The present value of the bond is calculated by entering the below in a financial calculator:

FV= 550

N= 21

PMT= 22

I/Y= 7.10

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

The value obtained is $366.73.

Therefore, the present value of the bond is $366.73.

In case of any query, kindly comment on the solution.

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