$1,000 par value bonds outstanding 8% interest. The bonds will mature in 25 years. Compute the current price of the bonds if the present yield to maturity is 7%
$1,000 par value bonds outstanding 8% interest. The bonds will mature in 25 years. Compute the current price of the bonds if the present yield to maturity is 7%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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$1,000 par
Expert Solution
Step 1
Face value = fv = $1000
coupon rate = 8%
Time = t = 25 years
Yield to maturity = r = 7%
Coupon = c = Coupon rate * fv = 0.08 * 1000 = $80
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