Practicing Success
A bond has face value of ₹200 maturing in 4 years ₹ Coupon rate is 4%p.a. and bond makes annual coupon payments. If the yield of maturity is 4%. then the present value of the bond, is : (use (1.04)-4 = 0.8551) |
₹120 ₹150 ₹200 ₹210 |
₹200 |
F = 200, C = 4% of 200 = 8, n = 4, r = 4% = .04 Put the value in the formula Bond price = $C×[\frac{1-(1+r)^{-n}}{R}]+\frac{F}{(1+r)^{n}} ≈ 200$ |