3. A bond's par value is $1,000. The bond has 5 years until maturity and its coupon rate is 7%. What is the value of the bond if the market rate is 10%, assuming annual compounding?

Please find the detailed answer as follows:

Nper = 5 (indicates the period over which interest payments are made)

PMT = 1000*7% = 70 (indicates the amount of interest payment)

PV =?(indicates the present value)

FV = 1000 (indicates the future/face value)

Rate = 10% (indicates the rate of interest)

Value of the Bond = PV(Rate,Nper,PMT,FV) = PV(10%,5,70,1000) = $886.28

Thanks.

Again use looking at the bond in problem 3. what

would the value be if it had 30 years to maturity instead

of 5 years, assuming all other features are as given in

problem 3?

Q#5 Answer