What must be the price of a $1000 bond with a 5.8% coupon rate,annual coupons,and 30 years to maturity if YTM is 7.5% APR?

Question

Quizplus · Accepted Answer

To calculate the price of the bond, we need to use the formula:
Price of Bond = ( Coupon Payment / (1 + YTM)^1 ) + ( Coupon Payment / (1 + YTM)^2 ) + ... + ( Coupon Payment + Face Value / (1 + YTM)^n )
where,
Coupon Payment = $1000 x 5.8% = $58
Face Value = $1000
YTM = 7.5%
n = 30

Putting the values in the formula, we get:
Price of Bond = (58/1.075^1) + (58/1.075^2) + ... + (58+1000/1.075^30)
Price of Bond = $799.22

Therefore, the best choice is C.

What Must Be the Price of a $1000 Bond with a 5.8