Question
An investor just purchased a annual 13 year bond that pays $40 each year for 13 years, and $1,000 in the final year. The investor
An investor just purchased a annual 13 year bond that pays $40 each year for 13 years, and $1,000 in the final year. The investor believes she can reinvest the coupon payments each year at a $4.25%, interest rate.
If the yield to maturity on the bond is $4%, then what is the price of the bond?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To calculate the price of the bond we need to discount the future cash flows coupon payments and fac...
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Financial Accounting and Reporting a Global Perspective
Authors: Michel Lebas, Herve Stolowy, Yuan Ding
4th edition
978-1408066621, 1408066629, 1408076861, 978-1408076866
