What must be the price of a $1000 bond with a 5.8% coupon rate, annual coupons, and 30 years to maturity if YTM is 7.5% APR?

Question

Quizplus · Accepted Answer

To find the price of the bond, we need to discount all the future cash flows (coupon payments and face value) back to present value using the YTM. We can use the formula:

PV = C x [1 - (1 / (1 + r) ^ n)] / r  + FV / (1 + r) ^ n

Where:
PV = Present Value
C = Annual coupon payment
r = YTM
n = Number of periods (years)

Plugging in the values, we get:

PV = 58 x [1 - (1 / (1 + 0.075) ^ 30)] / 0.075 + 1000 / (1 + 0.075) ^ 30
PV = $799.22

Therefore, the best choice is B.

What Must Be the Price of a $1000 Bond with a 5.8