Consider an annual coupon bond with a face value of $100, 14 years to maturity, and a price of $83

Finance Sep 26, 2020

Consider an annual coupon bond with a face value of $100, 14 years to maturity, and a price of $83. The coupon rate on the bond is 5%. If you can reinvest coupons at a rate of 4.5% per annum, then how much money do you have if you hold the bond to maturity?

Expert Solution

Computation of money that will be on hold the maturity;

=5%*100/4.5%*(1.045^14-1)+100

= 194.66

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