Question

A 25-year, $1,000 par value bond has an 8.5% annual payment coupon. The bond currently sells for $925. If the yield to maturity remains at its current rate, what will the price be 5 years from now? $884.19 $906.86 $930.11 $953.36 $977.20

Answer 1

$930.11

Step-by-step explanation:

We will first find the YTM

Par value 1000

Couple rate 8.50%

N 24

PV $925

PMT $85

FV $1000

We are going to use YTM to find the bonds price of 5 years .

Therefore:

Value in 5 years will be:

N 20

I/YR 9.28%

PMT 85%

FV $1,000

PV $930.116