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If you own a $1,000 face value bond with one year remaining to maturity and a 3 percent coupon rate and new bonds are paying 14 percent, what is the most you can get for your old bond? $1,140 $997.19 $1,000 $903.51

Respuesta :

Answer: Option (d) is correct.

Explanation:

Given that,

Face value = $1,000

Maturity = 1 year remaining

coupon rate = 3% ⇒ Coupon payment = 3% of 1000 = 30

New bonds paying (i)  = 14% = 0.14

Payment will be received after one year = face value + coupon payment

= 1000 + 30

= 1030

Therefore,

Present value =[tex]\frac{1030}{1.14}[/tex]

= 903.50 ⇒ the most you can get for your old bond.

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