Answered

IDNLearn.com offers a reliable platform for finding accurate and timely answers. Ask your questions and get detailed, reliable answers from our community of experienced experts.

Assume a bond has a $1,000 par value, a coupon rate of 6 percent, annual interest payments, and 7 years to maturity. If the yield on similar bonds is 8 percent, what is the current market value of this bond

Sagot :

Parrainidn

Based on the value of the bond at par, the coupon rate, and the yield to maturity, the current market value of the bond is $895.87.

What is the current bond value?

This can be found as:

= Present value of bond coupon payments + Present value of par value

Coupon payments:

= 6% x 1,000

= $60

As this payment is constant, it can be treated as an annuity.

Current market value is:

= (Coupon payment x Present value of annuity interest factor, 8%, 7 periods) + ( 1,000 / (( 1 + rate) ^ number of years)

= (60 x 5.2064) + ( 1,000 / 1.08⁷)

= $895.87

Find out more on bond pricing at https://brainly.com/question/26376004.

#SPJ1

Thank you for participating in our discussion. We value every contribution. Keep sharing knowledge and helping others find the answers they need. Let's create a dynamic and informative learning environment together. Find the answers you need at IDNLearn.com. Thanks for stopping by, and come back soon for more valuable insights.