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For a 15-year, 5% coupon rate, $1,000 par value annual bond, what's the bond value if the current interest rate is 3%? $987
For a 15-year, 5% coupon rate, $1,000 par value annual bond, what's the bond value if the current interest rate is 3%?
$987.2
$1,000
$1,238.8
$1,240.2
Expert Solution
Computation of Value of Bond using PV Function in Excel:
=-pv(rate,nper,pmt,fv)
Here,
PV = Value of Bond = ?
Rate = 3%
Nper = 15 Years
PMT = $1,000*5% = $50
FV = $1,000
Substituting the values in formula:
=-pv(3%,15,50,1000)
PV or Value of Bond = $1,238.76
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