Please show your work Gugenheim, Inc. offers a 6.00 percent coupon bond with ann
ID: 2612225 • Letter: P
Question
Please show your work
Gugenheim, Inc. offers a 6.00 percent coupon bond with annual payments. The yield to maturity is 3.4 percent and the maturity date is 5 years. What is the market price of a $1,000 face value bond?
$981.89
$1,117.72
$425.62
$271.67
$1,131.34
Please show your work
Gugenheim, Inc. offers a 6.00 percent coupon bond with annual payments. The yield to maturity is 3.4 percent and the maturity date is 5 years. What is the market price of a $1,000 face value bond?
$981.89
$1,117.72
$425.62
$271.67
$1,131.34
Explanation / Answer
Answer: $1,117.72
Calculation of the market price:
PV=$60*PVIFA(3.4%,5)+$1000*PVIF(3.4%,5)
=$60*4.528+$1000*0.846052
=$1117.72