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Present value of the stream of thirty

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Suppose you recently paid $1000 for a new 30-year bond issued by the telecommunications company, Verizon. The coupon rate is 6 percent, and for the sake of simplicity, let's assume that the $60 is paid once a year at the end of the year. Given the 6 percent interest rate, the present value of the bond's face value of $1000 paid thirty years from now is approximately $175. What is the present value of the stream of thirty, annual $60 payments? You can calculate the answer easily enough, but there is a shortcut.

Answers:

  • $1,100
  • $825
  • $700
  • $350
  • $140

Reference no: EM131041290

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