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Consider a 12-year, 12 percent annual coupon bond with a required rate of return of 10 percent. The bond has a face value of $1,000. (1) What is the fair present value of the bond? (2) If the required rate of return rises to 11 percent, what is the fair present value of the bond? (3) What has been the percentage change in the fair present value?

Respuesta :

madethisfortwitch1

Answer:

1136.27

1064.92

-6.279%

Explanation:

The basic pricing formula for a bond is just the present value of the coupon payments and the redepmtion

I solved this using annuities, my work is attached below

You can also solve using financial calculators but I'll assume you don't have access to one

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