Answered

Welcome to Westonci.ca, where your questions are met with accurate answers from a community of experts and enthusiasts. Connect with a community of professionals ready to provide precise solutions to your questions quickly and accurately. Get detailed and accurate answers to your questions from a dedicated community of experts on our Q&A platform.

A European bond has a par value of 1000 Euros, a coupon rate of 4.5 percent and a yield to maturity of 3.2 percent. The bond has 19 years to maturity. Coupons are made annually. What is the value of the bond?

Sagot :

facundobuzzetti

Answer:

Bond Price​= 1,182.96

Step-by-step explanation:

Giving the following information:

Par value= 1,000

Cuopon= 1,000*0.045= 45

YTM= 3.2%

Number of years (n)= 10

To calculate the price of the bond, we need to use the following formula:

Bond Price​= cupon*{[1 - (1+i)^-n] / i} + [face value/(1+i)^n]

Bond Price​= 45*{[1 - (1.032^-19)] / 0.032} + [1,000 / (1.032^19)]

Bond Price​= 633.31 + 549.65

Bond Price​= 1,182.96

We appreciate your time on our site. Don't hesitate to return whenever you have more questions or need further clarification. Your visit means a lot to us. Don't hesitate to return for more reliable answers to any questions you may have. Westonci.ca is your go-to source for reliable answers. Return soon for more expert insights.