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Value of a bond

Calculate the value of a $1,000 bond which has 10 years until maturity and pays quarterly interest at an annual coupon rate of 12%. The required return on similar-risk bonds is 20%.

A. $845.66

B $2,201.08

C $835.45

D $656.77

Solution Preview

Calculate the value of a $1,000 bond which has 10 years until maturity and pays quarterly interest at an annual coupon rate of 12%. The required return on similar-risk bonds is 20%.

A. $845.66

B $2,201.08

C $835.45

D $656.77

Answer: D $656.77

The calculations are shown below

Calculating Value of a bond
To calculate the price of ...

Solution Summary

Value of a bond has been calculated by discounting the cash flows from the bond.

$2.19