J&J Manufacturing just issued a bond with a $1,000 face value and a coupon rate of 7%. If the bond has a life of 30 years, pays annual coupons, and the yield to maturity is 6.8%, what is the present value of the bond's face value?

Question

Quizplus · Accepted Answer

The present value of the bond's face value is calculated using the formula for the present value of a single sum, which is PV = FV / (1 + r)^n, where FV is the face value ($1,000), r is the yield to maturity (6.8% or 0.068), and n is the number of periods (30 years). Plugging in the values, we get PV = $1,000 / (1 + 0.068)^30 = $138.95.

J&J Manufacturing Just Issued a Bond with a $1,000 Face