Question

A 25-year, $1,000 par value bond has an 8.5% annual payment coupon. The bond currently sells...

A 25-year, $1,000 par value bond has an 8.5% annual payment coupon. The bond currently sells for $925. If the yield to maturity remains at its current rate, what will the price be 10 years from now?

a.

$950.49

b.

$930.11

c.

$865.00

d.

$850.49

e.

$1021.11

Homework Answers

Answer #1

As per detials given in the question -
Correct Answer is option A - $950.49
To calculate yield to maturity-
Enter the stroke in the financial calculator-
Fv = 1000
PV = -925
N = 25
PMT = 85(1000*8.5%)
CPT -I/Y = 9.281
If YTM is same, calculate Price of Bond 10 years from now.
Enter Stroke in financial calculator-
FV = 1000
PMT = 85
N =10
I/Y = 9.281
CPT -PV = 950.49

I hope this clear your doubt.

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