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1) You are considering purchasing a 20 year bond from Saudi Arabia. You have a required return
of 15%. The bond has the following characteristics:
Par Value: $1,000
Maturity: 20 years
Coupon Rate: 12%
What would you offer for this bond today?

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Answer:

$812.20

Explanation:

Given the following bond characteristic:

Coupon rate = 12%

Market or yield rate = 15%

Years to maturity = 20 years

Face or par value = $1000

Inputting the values into a bond value calculator, the bond value output is : $812.20

This means that the sum of the present value of all likely coupon payment and par at maturity. It is simply the present value of all cash streams it is projected to generate.

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