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07 Jan

Suppose a $1,000 par-value bond was issued last

by jagguarpaw On: Uncategorised - 0 Comment

Question: Suppose a $1,000 par-value bond was issued last

Suppose a $1,000 par-value bond was issued last year with a promised annual rate of return (yield) of 6% when market interest rates on comparable securities were also 6%. Thus, the bond pays its holder $60 annually in interest. Today, one year later, market interest rates on comparable securities are 10%. The price of the 6% bond will approach what dollar figure?

The answer is $600. Please, show me how to solve this problem. (Prefer using financial calculator (List inputs))

Time to maturity = 1 , since it said last year, then today ???

 

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