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NEW QUESTION: 1
What is the fair price for a bond paying annual coupons at 5% and maturing in 5 years. Assume par value of
$100 and the yield curve is flat at 6%.
A. $100.00
B. $95.79
C. $94.73
D. $104.33
Answer: B
Explanation:
Explanation
The coupon payments can be considered an annuity which can be valued using the formula for the PV of annuities= annuity . Therefore the value of the five coupon payments is 5 * ((1-1/(1.06