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Save Score: 0 of 4 pts 2 of 12 (0 complete) HW Score: 0%, 0 of 50 pts P9-3 (similar to) EQuestion Help Related to Checkpoint 9.3) (Bond valuation) Calculate the value of a bond that matures in 11 years and has a $1,000 par value The annual coupon the market's required yield to maturity on a comparable-risk bond is 12 percent The value of the bond is S? (Round to the nearest cent) Enter your answer in the answer box and then click Check Answer All parts showing O Type here to search

Explanation / Answer

Value of Bond = Cupon Amount * Present Value of Annuity Factor (r,n) + Redemption Amount * Present Value of Interest Factor (r,n)

Where Cupon Amount = $1000 * 15%

= $150

Redemption Amount = $1000

r = yield to maturity or 12%

n = remaining maturity or 11 years

Present Value of Annuity Factor (12% ,11) = 5.937699133

Present Value of Interest Factor (12% ,11) = 0.287476104

Therefore

Value of Bond = $150 * 5.937699133 + $1000 * 0.287476104

Value of Bond =$890.6548699 + $287.4761041

Value of Bond = $1178.130974

Rounding to the nearest cent

Value of Bond = $1178.13

Therefore the value of the bond is $1178.13

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