Question

Calculate the value of a non-callable 15-year bond with a face value of $1,000 and a coupon rate of 6% compounded semi-annually if you expect 7% yield on the bond.

Group of answer choices

$908

$876

$1,460

$504

$808

Answer 1

Ans : Computation of Price of Bond

Price of Bond = Present Value of Coupons payments for 15 years + Present Value of  Face Value of bond repayable in 15th year

Where,
Coupon = 6% of 1000 = $ 60 for 15 Years
Since Coupon payments are same every year we can use present value annunity factor for calculating Present value of coupon payments for 15 years

Year	Cash Flows	Discounting factor @ 7%	PV of Cash Flows
1 - 15	60	9.1079	$546
15	1000	0.3624	$362
Total	$908

Ans : Value of Non-callable 15-year bond is $908.