A 25-year, $1,000 par value bond has an 8.5% annual payment coupon. The bond currently sells for $925. If the yield to maturity remains at its current rate, what will the price be 5 years from now? Select one: a. $865.00 b. $930.11 c. $883.61 d. $744.09 e. $976.62

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
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A 25-year, $1,000 par value bond has an 8.5% annual payment coupon. The bond currently sells for $925. If the yield to maturity remains at its current rate, what will the price be 5 years from now?

Select one:
a.
$865.00
b.
$930.11
c.
$883.61
d.
$744.09
e.
$976.62
 
 
Expert Solution
Step 1

Yield to maturity can be calculated by following function in excel

  • =RATE (nper, pmt, pv, [fv], [type], [guess])
    • Rate The interest rate.
    • Nper  The total number of payments.
    • Pmt  payment per period
    • Pv    The present value
    • Fv  The future value
    • Type The number 0 (zero) or 1 and indicates when payments are due.
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