Question

A 10-year bond, with a par value equaling $1,000, pays 7% annually. If similar bonds are currently yielding 6% annually, what is the market value of the bond? Use semiannual analysis. Use time value of money tables in Appendix B and Appendix D

Answer 1

The market value of the bond is $1073.60

Step-by-step explanation:

In order to find the market value of a bond we need to know it's par value, it's yield, its coupon payments and the number of year to maturity.

In this question we are given the par value is $1,000, the yield is 6%, the coupon is (0.07*1000)=$70 and the number of years to maturity are 10

Now we can put all these values in a financial calculator to compute the price of the bond

FV= 1,000

N=10

I= 6

PMT= 7

Compute PV= $1073.60