A Treasury bond has a yield to maturity of 4.4%, a time to maturity of 10 years, and a coupon rate of 5.0%. What is the bond price?

Question

Quizplus · Accepted Answer

Using the formula for bond pricing, 
Bond price = (Coupon payment / (1 + Yield to maturity)^time to maturity) + (Coupon payment / (1 + Yield to maturity)^(time to maturity - 1)) + ......... + (Coupon payment + Face value / (1 + Yield to maturity)^(time to maturity))

= (25 / 1.044^1) + (25 / 1.044^2) + ...... + (25 + 1000 / 1.044^10)

= $1,048.12 approximately.

Therefore, the best choice is D.

A Treasury Bond Has a Yield to Maturity of 4