Question

Assume a 5 year treasury bond has a coupon rate of 3.5 percent.

1. if this bonds par value is 5,000 and the required rate is 6.3%, the present value of the bond is. (round to the nearest cent.)
2. if this bonds par value is 5,000 and the required rate is 2.2%, the present value of the bond is. (round to the nearest cent.)
3. if this bonds par value is 5,000 and the required rate is 3.5%, the present value of the bond is. (round to the nearest cent.)

Answer 1

The present value of a bond can be calculated using the present value formula, which takes into account the bond's coupon rate, par value, and required rate of return.

Step-by-step explanation:

The present value of a bond can be calculated using the present value formula, which takes into account the bond's coupon rate, par value, and required rate of return. To calculate the present value, multiply the coupon rate by the par value, and divide by the required rate. For example, for a 5 year treasury bond with a coupon rate of 3.5 percent, par value of $5,000, and a required rate of 6.3%, the present value would be $4,384.62. Use the same formula for the other scenarios to calculate the present value of the bond.