A bond with a par value of $1,000 and a 13% semi-annual coupon rate has 20 years to maturity.Assuming it is priced to yield 10%, compounded semi-annually, what is the market value of the bond, to the nearest dollar?
A)$1,187
B)$1,107
C)$1,257
D)$2,373
E)None of the above

Question

Quizplus · Accepted Answer

The market value of the bond can be calculated using the present value of its future cash flows, which include the semi-annual coupon payments and the par value at maturity. The bond pays $65 every six months (13% of $1,000 divided by 2), and the yield is 5% per period (10% annual yield divided by 2). Using the present value formula for an annuity and a lump sum, the market value is approximately $1,257.

A Bond with a Par Value of $1,000 and a 13