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1. Gugenheim, Inc. offers a 7% coupon bond with annual payments. The yield to maturity is 5.85% and the maturity date is 8 years. What is the market price of a $1,000 face value bond?

Respuesta :

Answer:

The correct answer is $1,071.84

Explanation:

According to the scenario, the computation of given data are as follows:

Face Value (FV) = $1,000

Coupon bond = 7%

So coupon payment = $1,000 × 7% = $70

Yield to maturity (r) = 5.85%

Time period (Nper) = 8 years

So, we can calculate the current market price of the bond by using financial calculator.

The attachment is attached below.

So, the current market price of the bond is $1,071.84

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The market price of a $1,000 face value bond is $1,071.84.

  • The calculation is as follows:

Given that,

Face Value (FV) = $1,000

Coupon bond = 7%  

So coupon payment = $1,000 × 7% = $70  

Yield to maturity (r) = 5.85%  

Time period (Nper) = 8 years

The formula is

=-PV(RATE,NPER,PMT,FV,TYPE)

Therefore we can conclude that The market price of a $1,000 face value bond is $1,071.84.

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