question archive What is the value of a bond that has a par value of $1,000, a coupon of $120 (annually), and matures in 10 years? Assume a required rate of return of 7
What is the value of a bond that has a par value of $1,000, a coupon of $120 (annually), and matures in 10 years? Assume a required rate of return of 7
Subject:FinancePrice:2.87 Bought7
What is the value of a bond that has a par value of $1,000, a coupon of $120 (annually), and matures in 10 years? Assume a required rate of return of 7.8%.
$1,198.45
$1,200.43
$1,284.38
$1,349.76
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Answer:
coupon = $120 annually
and r =7.8%
so
P = 120/(1+0.078) + 120/(1+0.078)^2 +--------+1120/(1+0.078)^10
=> P = $1284.38
so value of bond = $1284.38
