Calculation of market value of bond at various ratesassume

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Calculation of Market value of bond at various rates.

Assume a government bond has a face value of $1,000, a coupon of 6 percent, semiannual payments of interest, and a five-year maturity. If the market interest rate for such a bond is 5 percent, how much is the bond worth? How much is it worth at a market rate of 8 percent?

5% Interest

 

Year 1

Year 2

Year 3

Year 4

Year 5

$1,000

 

 

 

 

 

6%

 

 

 

 

 

PV = 

 

8% Interest

 

Year 1

Year 2

Year 3

Year 4

Year 5

$1,000

 

 

 

 

 

6%

 

 

 

 

 

PV = 

Reference no: EM13356334

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