Respuesta :
Answer:
$79,208.48
Explanation:
The computation of the current price of the bond is shown below:-
Number of Cash flow PV annuity factor Discounted cash
years flow
1 -10 years $1,000 8.3166 $8,316.6
10 years $100,000 0.7089188 $70,891.88
Current price of the bond $79,208.48
Refer to the PV annuity factor so that we get to know the discounting factor value.
Based on the information given, the current price of the bond will be $71721.66
The current price of the bond is calculated thus:
- Cash flow = $1000
- Annuity factor = 0.83166
- Discounted cash flow = $1000 × 0.83166 = $831.66
Also for 10 years, the discounted cash flow will be:
= $100000 × 0.7089 = $70890
The current bond price will be:
= $70890 + $831.66
= $71721.66
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