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# Bonds: What is the Value

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You purchased a \$1,000 five percent coupon bond that matures in 10 years. How much would your bond be worth if interest rates fall to 4% the day after you purchase the bond? What would the bond be worth in one year if interest rates fell to 4% at that point?

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How much would your bond be worth if interest rates fall to 4% the day after you purchase the bond?

First, we will assume that 1 year is equal to 360 days and that the bond is semiannual bond. So, if the interest rates fall to 4% the day after you purchase the bond, it means that the bond will matures in 9 years and 359 days.

So, the period to be used to calculate the ...

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\$2.19