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)
Answer & explanation
Correct answer: option 3
F = 200, C = 4% of 200 = 8, n = 4, r = 4% = .04
Put the value in the formula
Bond price = $C×[\frac{1-(1+r)^{-n}}{R}]+\frac{F}{(1+r)^{n}} ≈ 200$