Question: A company issues a 1 0 - year bond with a face value of $ 1 , 0 0 0 and an annual coupon rate

A company issues a

10 -

year bond with a face value of $

1, 000

and an annual coupon rate of

5 % .

The bond pays interest semi

-

annually. If the current market interest rate for similar bonds is

6 %,

calculate the current price of the bond.

To solve this question, you'll need to understand the concepts of present value, coupon payments, and yield to maturity. Use the formula for the present value of an annuity to calculate the present value of the coupon payments and the formula for the present value of a lump sum to calculate the present value of the bond's face value at maturity. Sum these two present values to find the current price of the bond.

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