suppose a German company issues a bond with a par value of €1,000, 23 years to maturity, and a coupon rate of 3.8 percent paid annually. If the yield to maturity is 4.7 percent, what is the current price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)

Price of bond = €875.09

Explanation:

The value of the bond is the present value(PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV).

Value of Bond = PV of interest + PV of RV

The value of bond would  be worked out as follows:

Step 1  

Calculate the PV of interest payments

Annual interest payment

= 3.8% × 1,000 = 38

PV of interest payment = A ×(1- (1+r)^(-n))/r

r- annual yield = 4.7%

n- 23

PV of interest payment= 38 × (1-(1.047^(-23)/0.047 =  €527.37

Step 2

PV of redemption Value

PV = RV × (1+r)^(-n)

PV = 1,000  × (1.047)^(-23)  = €347.717

Step 3

Price of bond

=  527.37+  347.717 = €875.09

Price of bond = €875.09

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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