Question

A bond with a 10 percent coupon rate pays interest semiannually. Par value is $1,000. The bond has three years to maturity. The investors' required rate of return is 12 percent. What is the present value of the bond

Answer 1

Answer:

$950.83

Explanation:

For this question, we use the present value formula that is reflected on the attachment below:

Data provided in the question

Future value = $1,000

Rate of interest = 12%  ÷ 2 = 6%

NPER = 3 years  × 2 = 6 years

PMT = $1,000 × 10% ÷ 2 = $50

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

After solving , the present value of the bond is $950.83