What is the price of a 6?-year, 8.3% coupon? rate, $1,000 face value bond that pays interest annually if the yield to maturity on similar bonds is 7.1%?? The price of the bond is ?$ nothing.

? (Round to the nearest? cent.)

Annual coupon=1000*8.3%

=83

Hence price of bond=Annual coupon*Present value of annuity factor(7.1%,6)+1000*Present value of discounting factor(7.1%,6)

=83*4.75186032+1000*0.662617917

=$1057.02(Approx)

NOTE:

1.Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=83*[1-(1.071)^-6]/0.071

=83*4.75186032

2.Present value of discounting factor=1000/1.071^6

=1000*0.662617917