What is the value of a bond that has a par value of $1,000,a coupon rate of $80 (annually),and matures in 11 years? Assume a required rate of return of 11%,and round your answer to the nearest $10.

Question

Quizplus · Accepted Answer

To calculate the value of the bond, we need to use the formula:
Bond value = (Coupon rate/Required rate of return)*(1 - 1/(1+Required rate of return)^n) + Par value/(1+Required rate of return)^n
where n is the number of years until maturity. Plugging in the given values, we get:
Bond value = (80/0.11)*(1 - 1/(1+0.11)^11) + 1000/(1+0.11)^11
Bond value = $810. Therefore, the best choice is C.

What Is the Value of a Bond That Has a Par