What is the value of a bond that has a face 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 / r) x [1 - 1/(1+r)^n] + F/(1+r)^n

Where:
PV = present value
C = coupon payment
r = required rate of return
n = number of periods
F = face value

Plugging in the values:
PV = (80 / 0.11) x [1 - 1/(1+0.11)^11] + 1000/(1+0.11)^11
PV = $813.80

Rounding to the nearest $10:
PV = $810

Therefore, the best choice is C.

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