Question

A bond that matures in 15 years has a $1,000 par value The annual coupon interest rate is 12 percent and the markefs required yleld to mafurity on a comparable-rek bond is 17 percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond it it paid ingerest semiannualy? a. The value of this bond it paid interest annually would bes (Round to the nesarest cent.)

Answer 1

The value of the bond if it paid interest annually would be $513.26.

Step-by-step explanation:

To calculate the value of a bond, we need to use the present value formula. The present value is equal to the sum of the present values of the bond's future cash flows, which are the annual coupon payments and the face value.

For a bond that matures in 15 years with a $1,000 par value and an annual coupon interest rate of 12 percent, we can calculate its value if it paid interest annually using the present value formula.

The value of the bond if it paid interest annually would be $513.26.