A 3-year bond with 10% coupon rate and $1000 face value yields 8% APR. Assuming annual coupon payment, calculate the price of the bond.
A) $857.96
B) $951.96
C) $1000.00
D) $1051.54

Question

Quizplus · Accepted Answer

The price of the bond is calculated using the present value of future cash flows, which include the annual coupon payments and the face value at maturity. With a 10% coupon rate, the bond pays $100 annually. Discounting these payments and the face value at an 8% yield gives a price of $1051.54.

A 3-Year Bond with 10% Coupon Rate and $1000 Face