A three-year coupon bond has a face value of $1,000, a coupon rate of 5% and a yield to maturity of 3%. What is the price of the bond?

Question

Quizplus · Accepted Answer

The price of the bond is calculated by discounting the future cash flows (coupon payments and face value) at the yield to maturity rate. The bond pays $50 annually for 3 years and $1,000 at maturity. The present value of these cash flows at a 3% yield is $1,056.57.

A Three-Year Coupon Bond Has a Face Value of $1,000