What would you be willing to pay for a $1,000 bond paying $70 interest at the end of each year and...

Question

What would you be willing to pay for a $1,000 bond paying $70 interest at the end of each year and maturing in 25 years if you wanted the bond to yield the following rates of return? 12%

David · Accepted Answer

Face value= $1,000 
Coupon payment annually = $ 70 
Rate of return = 12% 
Maturity period =25 years 
The current market price can be computed as shown below. 
Year Coupon 
Principal 
Repayment 
Total cash 
inflow 
PV 
factor 
PV of 
cashflows($) 
1 70 0 70 0.893 62.500 
2 70 0 70 0.

What would you be willing to pay for a $1,000 bond paying $70 interest at the end of each year and maturing in 25 years if you wanted the bond to yield the following rates of return? 12%

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment