you want to buy a corporate bond that has a face value of 1000 for that pays coupon of 0.05 paid quarterly . At that time, the bond had a YTM of 0.06 and 14 years left to maturity. what is the price of the bond?
you want to buy a corporate bond that has a face value of 1000 for that pays coupon of 0.05 paid quarterly . At that time, the bond had a YTM of 0.06 and 14 years left to maturity. what is the price of the bond?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:you want to buy a corporate bond that has a face value of 1000 for that pays coupon of 0.05 paid
quarterly . At that time, the bond had a YTM of 0.06 and 14 years left to maturity.
what is the price of the bond?
Expert Solution
Step 1
Introduction:
Present value refers to the current valuation for a future sum. Investors determine the present value of an underlying asset or security to ascertain the value required in the present time for the expected future sum. The computation of the present value for a future sum requires the future amount, the interest rate or the discount rate, the number of years, and the number of compounding periods in a year. The present value for a future sum can be determined either by using the formula for the same or by using the excel PV function.
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