USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A $1000 par value bond with four years to maturity and a 5 percent coupon has a yield to maturity of 6 percent. Interest is paid annually.
-Refer to Exhibit 13.3. Calculate the current price of the bond.
A) $964.90
B) $965.35
C) $981.41
D) $1035.45
E) $1035.85

Question

Quizplus · Accepted Answer

Using a financial calculator, the current price of the bond can be calculated as follows: N = 4, I/Y = 6, PMT = 50, FV = 1000, and solving for PV gives $965.35. Therefore, the best choice is B.