A bond has a principal of $3,500, a maturity of 30 years, a quarterly couponof 1.25% (that is, 5% per annum) and a quarterly yield-to-maturity of 1.25%.Calculate the bond’s price explaining your answer

A bond has a principal of $3,500, a maturity of 30 years, a quarterly couponof 1.25% (that is, 5% per annum) and a quarterly yield-to-maturity of 1.25%.Calculate the bond’s price explaining your answer

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter12: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 6FPE

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Question

A bond has a principal of $3,500, a maturity of 30 years, a quarterly coupon
of 1.25% (that is, 5% per annum) and a quarterly yield-to-maturity of 1.25%.
Calculate the bond’s price explaining your answer

Definition Definition Calculates the present value of a bond's expected future periodic coupon payments. Bond valuation determines the theoretical fair value of a particular bond and helps investors estimate what rate of return they could expect. The bond's theoretical fair value is computed by discounting the future cash flows or coupon payments by an applicable discount rate.

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