What must be the price of a $1 000 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 present value formula: PV = (C / r) x [1 - 1 / (1 + r)^n] + FV / (1 + r)^n, where PV is the present value, C is the annual coupon payment, r is the yield to maturity (YTM), n is the number of years to maturity, and FV is the face value of the bond. Plugging in the given values, we get PV = (58 / 0.075) x [1 - 1 / (1 + 0.075)^30] + 1000 / (1 + 0.075)^30 = $799.22. Therefore, the best choice is C.

What Must Be the Price of a $1 000 Bond