Answer:
The bond price is $1024.74.
Explanation:
Given,
time, t= 8 year
Maturity value, F = $1,000
interest rate, r = 6.1%
Coupon, C = $65
Bond's price = [tex]C [ \dfrac{(1-[1+r]^{-t} )}{r} ] + \dfrac{F}{[1+r]^t}[/tex]
= [tex]65 [ \dfrac{(1-[1+0.061]^{-8})}{0.061}] +\dfrac{1000}{[1+0.061]^8}[/tex]
= [tex]65 [\dfrac{ (1- \dfrac{1}{1.6059})}{0.061}] + \dfrac{1000}{1.6059}[/tex]
= [tex]65 [ \dfrac{(1 - 0.6227)}{0.061}] +\dfrac{1000}{1.6059}[/tex]
=[tex] 65\times [ 6.1852] + 622.70[/tex]
=$1024.74.
Hence, the bond price is $1024.74.
