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Example 2: The price of the bond today is the present value of the interest payments plus the present value of the principal which is
Example 2: The price of the bond today is the present value of the interest payments plus the present value of the principal which is returned at maturity. In other words, the present value of the future cash inflows. 1,000 FV 100 Pmt 20 N 10 i Cpt PV 1,000 Note that this is the same as the face value of the bond, which is the amount to be received at maturity. This is because the interest payments of $100 per year match the required rate of return (yield to maturity) of 10%
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