Answer:
What was the price of this bond when it was issued?
$ 1,095,23
Explanation:
To know the Price of the bond when it was issued we need first to calculate the Present Value of the Principal and then through the annuity method calculate the Present Value of the coupons.
Bond Value
Principal Present Value = F / (1 + r)^t
Coupon Present Value = C x [1 - 1/(1 +r)^t] / r
The price of this bond it's $553 + $542 = $1,095,23
Bond $1,000
Coupon $74,00
Annual Rate 7,4%
YTM 6,1%
Years 10
Present Value of Bonds $553 = 1,000/(1+0,061)^10
Bond 1.000
YTM Rate 6,10%
Periods 10
Present Value of Coupons $542 = 74(Coupon) x 7,33
7,33 = [1 - 1/(1+0,061)^10 ]/ 0,061
Bond 1.000
YTM Rate 6,10%
Periods 10
