Question

Asked Nov 6, 2019

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What must be the price of a $2,000 bond with a 5.7% coupon rate, annual coupons, and 30 years to maturity if YTM is 9.3% APR?

Step 1

The price of a bond consists present value of all future coupon payments and the redemption payment.

It is given that,

Number of years is 30.

Face value is $2,000.

Coupon rate is 5.7%. So, coupon payment will be ($2,000 × 5.7%) = $114.

Yield to maturity is 9.3%.

Step 2

The below expression can be used to calculate the price of bond.

Step 3

Substitute $114 for coupon payment, 9.3% for *i,* 30 for *n* and $...

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