Nick s considering investing in atwo year 10000 bond paying

Nick s considering investing in atwo year 10,000 bond paying a coupon rate of 4%. The market interest rate is 3%. Calculate the present value(PV) of the bond and enter it below Number

Solution

Maturity value of par value 10,000 Stated rate of interest 4% Market rate of interest 3% Annual interest received 400 (10000 *4%) Annuity for two years at 3% 1.9135 Present value factor of Yr-2 0.9426 Present value of interest 765.4 Present value of maturity 9426 Present value of Bond 10191.4