You are interested in investing in a fiveyear bond that pays

You are interested in investing in a five-year bond that pays 7.8 percent coupon with interest to be received semiannually. Your required rate of return is 8.4 percent. What is the most you would be willing to pay for this bond?

Solution

PMT = 39, FV = 1000, rate = 4.2%, N = 10

use PV funciton in Excel

most one is willing to pay = 975.91