EndofChapter Exercise 2 Complose the ormula that is used to

End-of-Chapter Exercise 2 Complose the ormula that is used to cakato the (t

Solution

Fair Market Price of a Bond is equal to the prevent value of all the future payments receivable in the form of interest or on maturity

Hence, the required formula is

$2000 = $200/(1+r) + C/(1+r)²+......+C/(1+r)²⁰+$1000/(1+r)²⁰

1000 is the face value payable on maturity.

200 = Annual Interest Payment which is 1000/20% = 200