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You are considering investing in a 20-year bond that has a coupon rate of 7% and a yield to maturity of 6.75%. The bond pays coupons annually. What is the fair price of the bond

User Urmelinho
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1 Answer

2 votes

Answer:

$1,027.01

Step-by-step explanation:

We use the present value formula for this question. The attachment is shown below:

Given that,

Assuming Future value = $1,000

Rate of interest = 6.75%

NPER = 20 years

PMT = $1,000 ×7% = $70

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

So, after solving this, the fair price of the bond is $1,027.01

You are considering investing in a 20-year bond that has a coupon rate of 7% and a-example-1
User Shezan Kazi
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