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A $1,000 par value bond pays interest of $35 each quarter and will mature in 10 years. If your simple annual required rate of return is 12 percent with quarterly compounding, how much should you be willing
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35 votes
35 votes
A $1,000 par value bond pays interest of $35 each quarter and will mature in 10 years. If your simple annual required rate of return is 12 percent with quarterly compounding, how much should you be willing to pay for this bond

User Phonon
by
3.1k points

1 Answer

14 votes
14 votes

Answer:

the present value is $1,115.57

Step-by-step explanation:

the computation of the present value is shown below:

Given that

Future value be $1,000

RATE is 12% ÷ 4 = 3%

NPER is 10 × 4 = 40

PMT is $35

The formula is shown below:

=-PV(RATE,NPER,PMT,FV,TYPE)

= $1,115.57

Hence, the present value is $1,115.57

User Himanshu Pandey
by
2.6k points
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