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
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
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 8P
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Question
A 25-year, $1,000 par
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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