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    Bond valuation

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    Assume that you wish to purchase a 25-year bond that has a maturity value of $1,000 and makes semiannual interest payments of $45. If you require a 7 percent nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?
    Note that they are referring to semiannual payments. Using a calculator, remember to input N=50 and I=3.5% in this case, since it requires a 7% nominal yield

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    Solution Preview

    The maximum price would be the present value of interest and principal discounted at the required yield to maturity. The ...

    Solution Summary

    The solution explains how to calculate the current price of a bond

    $2.19

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