A $1000 face value bond,with coupon rate of 8% paid annually,has five years to maturity.If bonds of similar risk are currently earning 6%,what is the current price of the bond?

Question

Quizplus · Accepted Answer

The bond price is calculated using the present value of its future cash flows, which include annual coupon payments and the face value at maturity. With a coupon rate of 8%, the annual coupon payment is $80. Discounting these payments and the face value at the market rate of 6% gives a price of approximately $1084.25.

A $1000 Face Value Bond,with Coupon Rate of 8% Paid