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    Estimating Present Value of a Bond

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    Question: Calculate the present value of a bond that pays a coupon rate of 7% per year for 20 years, and matures in 20 years at its face value of $1000, using each of the following current market interest rates at the discount rates of:(a) 5%; (b) 7%; (c) 9%. Show your calculations.

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    Solution Preview

    Annual Coupon amount=C=1000*7%=$70
    Number of coupon payments=n=20
    Maturity amount=Face Value=M=$1000

    a) Discount rate=r=5%
    Present value of ...

    Solution Summary

    In an organized and step-wise manner this solution describes the steps required to calculate the present value of a bond at various discount rates. All calculations have been provided.

    $2.19

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