Could someone tell me how to calculate this? Thanks A Bond Problem Renee is cons

Question

Could someone tell me how to calculate this? Thanks

A Bond Problem Renee is considering the purchase of a bond. The bond has a $1,000 face value and a contractual interest rate of 6%. A bond investment results in two types of cash flows-the interest. Which is an annuity, and the repayment of principal, which is a lump sum when the bond matures. The cash flow sketch above shows the cash flows that Renee will receive. How much should Renee pay for this bond, assuming that she demands a rate of return of 6%? Round your answer to the nearest whole dollar.

Explanation / Answer

Present value of the Bond = C * present value of annuity + Par value * present value of factor year

Par value = $1000

yearly coupon = $60

Yield ot maturity or Discount the annuity = 6%

Period = 3 years

As per formula =

Value of the Bond = 60 * PVIFA (6%, 3) + $1000 * PVIF (6%, 3) = 60 * 2.6730 + 1000 * 0.8396 = $999.98

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