Question

A semiannual coupon bond with face value of $1,000 has a coupon rate of 6% and matures in 16 years. The market-determined discount rate on this bond is 14%. What is the price of the bond?

Answer 1

$1,125.30

Step-by-step explanation:

The Price of the Bond is its Current/Trading price also known as the Present Value (PV). This is determined as follows :

Fv = $1,000

Pmt = $1,000 × 6% = $160

P/yr = 1

n = 16

i = 14%

PV = ?

Using the Financial calculator to enter the values as above, the Pv is $1,125.30.

Thus, the price of the bond is $1,125.30.