Answer:
$1132.08
Explanation:
You want the value of a 16-year $1000 bond with a coupon rate of 15% if its expected yield is 13%.
Present value
Each coupon is worth $1000×0.15 = $150. The present value of the 16-year series of coupons is ...
[tex]150\times\dfrac{1-1.13^{-16}}{1.13-1}\approx990.58[/tex]
The present value of the mature bond is ...
[tex]1000\times1.13^{-16}\approx141.50[/tex]
The value of the bond is the sum of these present values:
990.58 +141.50 = 1132.08
The bond has a current value of $1132.08.
