# A coupon bond that pays interest of $100 annually has a par value of$1,000, matures

A coupon bond that pays interest of $100 annually has a par value of$1,000, matures in 5 years, and is selling today at a $72 discount from par value. The yield to maturity on this bond is __________. 5 Answers  tipsy4lyf Posts: 4, Reputation: 1 New Member #2 May 8, 2012, 04:31 AM Calculate a. the value and b. the duration of a$1000 3-year bond if the interest
Calculate
a. the value and
b. the duration
of a \$1000 3-year bond if the interest rate is 4%, 5%, 7%, if the bond pays annual interest of 7.5% of the bond’s face value!
 Curlyben Posts: 18,167, Reputation: 8753 Admin & Wine Expert #3 May 8, 2012, 04:37 AM
Quote:
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 tipsy4lyf Posts: 4, Reputation: 1 New Member #4 May 8, 2012, 04:40 AM
Quote:
 Originally Posted by Curlyben Please refer to this announcement
My apologies, I'm not sure if this is the way i would have to work it out.

PV= 75/1,04+75/1,05ˇ2+1075/1,07ˇ3 not?
 tipsy4lyf Posts: 4, Reputation: 1 New Member #5 May 8, 2012, 04:41 AM
Quote:
 Originally Posted by tipsy4lyf My apologies, I'm not sure if this is the way i would have to work it out. PV= 75/1,04+75/1,05ˇ2+1075/1,07ˇ3 not?
I believe from the total i would get the value,
 ArcSine Posts: 952, Reputation: 518 Senior Member #6 May 8, 2012, 03:07 PM
You got it, Tipsy; it's

$\frac{75}{1.04} + \frac{75}{1.05^2} + \frac{1,075}{1.07^3} = 1,017.66$

By the way, as a quick sniff test of the proposed answer, from the fact that since the bond is paying a coupon rate that's greater than any of the involved discount rates, it must be priced at a premium to par. By itself that doesn't prove our answer, but it at least tells us that the value of the bond must be greater than 1,000 rather than < 1,000.

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