Answer:
value of the bond = $2,033.33
Explanation:
We know,
Value of the bond, [tex]B_{0} = [I * \frac{1 - (1 + i)^{-n}}{i}] + \frac{FV}{(1 + i)^n}[/tex]
Here,
Face value of par value, FV = $2,000
Coupon payment, I = Face value or Par value × coupon rate
Coupon payment, I = $2,000 × 6.04%
Coupon payment, I = $128
yield to maturity, i = 6.1% = 0.061
number of years, n = 15
Therefore, putting the value in the formula, we can get,
[tex]B_{0} = [128 * \frac{1 - (1 + 0.061)^{-7}}{0.061}] + [\frac{2,000}{(1 + 0.061)^7}][/tex]
or, [tex]B_{0} = [128 * \frac{1 - (1.061)^{-7}}{0.061}] + [\frac{2,000}{(1.061)^7}][/tex]
or, [tex]B_{0} = [128 * \frac{0.3393}{0.061}] + 1,321.3635[/tex]
or, [tex]B_{0} = [128 * 5.5623] + 1,321.3635[/tex]
or, [tex]B_{0} =[/tex] $711.9738 + 1,321.3635
Therefore, value of the bond = $2,033.33
