Asked by
Spring Gonzalez
on Dec 09, 2024
Verified
J&J Manufacturing just issued a bond with a $1,000 face value and a coupon rate of 7%. If the bond has a life of 30 years, pays annual coupons, and the yield to maturity is 6.8%, what% of the bond's total price is represented by the present value of the coupons?
A) 85.7%
B) 86.1%
C) 86.4%
D) 93.0%
E) 100.0%
Present Value
The current assessment of a future cash sum or cash flow streams, discounted at a defined rate of return.
Coupon
The interest payment made to bondholders, typically expressed as an annual percentage of the bond's face value.
- Distinguish between zero-coupon and coupon bearing bonds in financial contexts.
- Gain an understanding of the function of coupon rates in determining the price of bonds.
Verified Answer
CL
Learning Objectives
- Distinguish between zero-coupon and coupon bearing bonds in financial contexts.
- Gain an understanding of the function of coupon rates in determining the price of bonds.