Answered step by step
Verified Expert Solution
Question
1 Approved Answer
What is the value of a bond that has an 8% coupon (annual payments), a 4-year maturity, and a principal of $1,000, if yields on
What is the value of a bond that has an 8% coupon (annual payments), a 4-year maturity, and a principal of $1,000, if yields on similar securities are 10%.
annual payments=(1000*8%)=$80
Hence value of bond=annual payment*Present value of annuity factor(10%,4)+$1000*Present value of discounting factor(10%,4) =$80*3.169865446+$1000*0.683013455
which is equal to =$936.60
I just want to know how to get 3.169865446 and 0.683013455
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started