Question

Suppose you recently paid $1000 for a new 30-year bond issued by the telecommunications company, Verizon. The interest ("coupon") rate is 6 percent, and for the sake of simplicity, let’s assume that the $60 is paid once a year at the end of the year. Given the 6 percent interest rate, the present value of the bond's face value of $1000 paid thirty years from now is approximately $175. What is the present value of the stream of thirty, annual $60 payments? You can calculate the answer or use a shortcut.

$1,000
$825
$700
$350
$140

Answer 1

$825

Step-by-step explanation:

The computation of the present value of the stream of thirty is shown below:

= Face value of the bond - Present value of maturity value after 30 years

= $1,000 - $175

= $825

Simply we deduct the present value of maturity value after 30 years from the face value of the bond so that the correct amount can come

All other information which is given is not relevant. Hence, ignored it