Timothy has an opportunity to buy a $1000 par value municipal bond with a coupon rate of

Question:

Timothy has an opportunity to buy a $1000 par value municipal bond with a coupon rate of 7 percent and a maturity of five years. The bond pays interest quarterly. If Timothy requires a return of 8 percent, compounded quarterly, what should he pay for the bond?

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...

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