J&J Manufacturing just issued a bond with a $1,000 face value and a coupon rate of 8%. If the bond has a life of 20 years, pays annual coupons, and the yield to maturity is 7.5%, what is the total present value of the bond’s coupon payments?

1.10K views
0
0 Comments

J&J Manufacturing just issued a bond with a $1,000 face value and a coupon rate of 8%. If the bond has a life of 20 years, pays annual coupons, and the yield to maturity is 7.5%, what is the total present value of the bond’s coupon payments?

  1. A) $   41
  2. B) $   15
  3. C) $   56
  4. D) $1,000.00

E)         $1,050.97

1 Answer

0
Darshita6.14K 0 Comments

Answer: C

Response: PV of coupons = $80 [(1 1/1.07520)/ .075] = $815.56

Using the TVOM keys instead of algebra?

Coupon payments are 8% of $1000 or $80. So, 80 PMT, 20 N, 7.5I/Y, CPT PV = 815.56

Contact us today

Ask for our academic services

Copyright SmartStudyHelp 2016. All Rights Reserved

Mail Us : [email protected]