Suppose a 5 year 8% p.a.bond with a yield of 6.5% and principal of $100 000 pays coupon payments semi-annually.What is the present value of this bond?

A) $ \$ 102 \quad 954.64 $
B) $ \$ 106 \quad 276.42 $
C) $ \$ 106 \quad 316.80 $
D) $ \$ 135 \quad 978.17 $

Question

Suppose a 5 year 8% p.a.bond with a yield of 6.5% and principal of $100 000 pays coupon payments semi-annually.What is the present value of this bond?

A) $ \$ 102 \quad 954.64 $
B) $ \$ 106 \quad 276.42 $
C) $ \$ 106 \quad 316.80 $
D) $ \$ 135 \quad 978.17 $

Quizplus · Accepted Answer

Using equation 6.4,and the information provided in the question,the present value of this bond is P = 4000[(1-(1.0325)^-¹⁰)/0.0325] + 100 000/(1.0325)¹⁰ = $106,316.80.

Suppose a 5 Year 8% P $102954.64 \$ 102 \quad 954.64 $102954.64

Suppose a 5 Year 8% P $\$ 102 \quad 954.64$