Suppose a company issued a 20-year bond two years ago. This bond has a coupon rate of 6 percent, paid semi-annually, and is priced to yield 5 percent. The value of this bond is closest to:

Question

Quizplus · Accepted Answer

The bond's value is calculated using the present value of its future cash flows, which include semi-annual coupon payments and the face value at maturity. Given a coupon rate of 6% and a yield of 5%, the bond's price is higher than its face value, making $1,117.78 the closest value.

Suppose a Company Issued a 20-Year Bond Two Years Ago