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 for present value of a bond:
PV = C/ (1+r)^1 + C/ (1+r)^2 + ... + C/ (1+r)^n + F/ (1+r)^n 
where
PV = present value of the bond
C = coupon payment
r = required rate of return
n = number of periods
F = face value or par value

Plugging in the given values, we get:
PV = $80/ (1+0.11)^1 + $80/ (1+0.11)^2 + ... + $80/ (1+0.11)^11 + $1,000/ (1+0.11)^11
PV = $813.80
So, the value of the bond is $813.80, which is closest to option C.

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