How much should you be prepared to pay for a 10-year bond with a 6 percent coupon and a yield to maturity to maturity of 7.5 percent?

Question

Quizplus · Accepted Answer

Using the BAII Plus calculator, we can input the following:
N = 10 (years)
I/Y = 7.5 (yield to maturity)
PV = -???? (unknown price we are solving for)
PMT = 60 (6% coupon, paid annually = 0.06 x 1000)
FV = 1000 (face value)

By solving for PV, we get $897.04, which is the price we should be prepared to pay for the bond. Therefore, the correct answer is B.

How Much Should You Be Prepared to Pay for a 10-Year