Question

Suppose that General Motors Acceptance Corporation issued a bond with 10 years until​ maturity, a face value of $ 1 comma 000​, and a coupon rate of 7.7 % ​(annual payments). The yield to maturity on this bond when it was issued was 5.7 %. What was the price of this bond when it was​ issued?

Answer 1

The correct answer is $1,149.32.

Step-by-step explanation:

According to the scenario, the computation of the given data are as follows:

Face value FV = $1,000

Coupon rate = 7.7%

So, Payment = 7.7% × $1,000 = $77

YTM (rate ) = 5.7%

Time period = 10 years

So, we can calculate the present value by using financial calculator:

The attachment is attached.

So, PV = $1,149.32