1. COMPANY XYZ issues 10-year 8% annual coupon bonds. The market demands a return of 6%. What should be the price of the bond? Assume a face value of $1,000
$1,147.20 |
||
$1,084.25 |
||
$865.80 |
||
$920.16 |
Price of a bond is present value of cashflows (coupon and maturity value) associated iwth the bond.
Price of a bond is mathematically represented as:
where C is the annual coupon, i is the YTM (or market required return), M is the face value n is the number of periods.
For our bond, M = $1000, C = $80, n = 10, i = 6%
P = $1,147.20 --> Answer
Get Answers For Free
Most questions answered within 1 hours.