Calculate the price of a 6.2 percent coupon bond with 18 years left to maturity

Q: Calculate the price of a 6.2 percent coupon bond with 18 years left to maturity

Answer:- The price of the bond is calculated as the present value of all future cash flows: Price of Bond = 6.2% × $1000 × 1 (1 + 4.8%)-36 + $1000 4.8% (1 + 4.8%)36 Price of Bond = $1167.48 Since the bond is greater than $1000. This is premium bond Price of Bond = 6.2% × $1000 × 1 (1 + 4.8%)-36 + $1000 4.8% (1 + 4.8%)36 Price of Bond = $1167.48 Since the bond is greater than $1000. This is premium bond

ID: 2735702 • Letter: C

Question

Calculate the price of a 6.2 percent coupon bond with 18 years left to maturity and a market interest rate of 4.8 percent. (Assume interest payments are semiannual.) (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Explanation / Answer

Answer:-

The price of the bond is calculated as the present value of all future cash flows:

Price of Bond = 6.2% × $1000 ×

1 (1 + 4.8%)-36

$1000

4.8%

(1 + 4.8%)36

Price of Bond = $1167.48

Since the bond is greater than $1000.

This is premium bond