# Value of a bond

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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#### Solution Preview

The price of a bond is the present value of interest and principal discounted at the market rate. For the given bond, the annual interest is 1,000X5%=$50, the years to maturity are 10, principal amount is $1,000 and the discounting rate is the market rate which is 4%.

In order to calculate the ...

#### Solution Summary

The solution explains how to calculate the value of a bond given change in interest rates

$2.19