What is the price of a coupon bond that has annual coupon payments of $85,a par value of $1,000,a yield to maturity of 10%,and a maturity of three years?

Question

Quizplus · Accepted Answer

We can calculate the bond price using the formula:
Bond price = (C / r) x [1 - (1 / (1+r)^n)] + (FV / (1+r)^n)
where C is the annual coupon payment, r is the yield to maturity (in decimals), n is the number of periods until maturity, and FV is the face value or par value of the bond.

Plugging in the given values, we get:
Bond price = (85 / 0.10) x [1 - (1 / (1+0.10)^3)] + (1000 / (1+0.10)^3)
Bond price = $962.70

Therefore, the best choice is C.

What Is the Price of a Coupon Bond That Has