Consider a bond that promises to make coupon payments of $100 each year for three years (beginning in one year's time)and also repays the face value of $2000 at the end of the third year. If the market interest rate is 6 percent, what is the present value of this bond?

Question

Quizplus · Accepted Answer

The present value of the bond is calculated by discounting each cash flow (coupon payments and face value) back to the present using the market interest rate of 6%. The present value of the bond is the sum of the present values of all these cash flows, which equals $1946.53.

Consider a Bond That Promises to Make Coupon Payments of $100