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?

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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

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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
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