Final answer:
The future price of the bond 2 years from now is $1,150.94.
Step-by-step explanation:
To calculate the future price of the bond, we need to consider its yield to maturity. Since the bond's yield to maturity remains at its current rate, we can assume it will still be 7.8 percent. The price of the bond is determined by the present value of its future cash flows, which includes the coupon payments and the par value.
Based on the information given, a 9-year bond with a par value of $1,000 and a 7.8 percent annual coupon currently sells for $1,123. In 2 years, the bond will have 7 years left until maturity. We can use the present value formula to calculate its future price.
The future price of the bond can be calculated using the formula:
Future Price = (Coupon Payment x (1 - (1 + Yield to Maturity)^-Number of Years)) / Yield to Maturity + Par Value x (1 + Yield to Maturity)^-Number of Years
Plugging in the values, we get:
Future Price = ($78 x (1 - (1 + 0.078)^-7)) / 0.078 + $1,000 x (1 + 0.078)^-7
Calculating this equation, we find that the future price of the bond 2 years from now is $1,150.94.