Question

suppose a three year bond is purchased with an APR of 6.75%. The face value of the bond is 6500. Find the purchase price of the bond. I definitely did the math wrong and would appreciate if you could explain how you got the answer! I have quite a few questions like this on my homework so it would be helpful! Have a great New Year's! Please respond by 9 PM if you can!

Answer 1

The purchase price of the bond is

$5343.3018

Step-by-step explanation:

Given that:

The Face value is FV=$6,500.

And the APR (Annual percentage rate) r = 6.75% = 0.0675.

The time till maturity (Number of compounding periods) is 3 years.

Face value: FV=$6,500.

APR: r=0.0675

Time: t=3

Purchase price of the bond: PV = ?

To find the present value or the purchase price of the bond using the formula:

PV=(FV)×(1+r) ^ −t

Therefore,

PV = ($6,500) × (1+0.0675) ^-3

PV = $5,343.301811

Therefore,

The purchase price of the bond is $5,343.30.