7. Bond valuation A bond has a $ 1,000 face value and provides an 8% annual coupon for 30 years. The appropriate discount rate is 10% . What is the value of the bond? V = CP (PVIFA 10% , 30 ) + MV (PVIF 10% , 30 ) = $80 (9.427) + $1,000 (0.057) = $754.16 + 57.00 = $811.16 Sample problem #1 A bond has a $ 1,000 face value and provides a 6% annual coupon for 20 years. The appropriate discount rate is 6% . What is the value of the bond? V = CP (PVIFA 6% , 20 ) + MV (PVIF 6% , 20 ) = $60 (11.4699) + $1,000 (0.3118) = $688.19 + 311.80 = $999.99
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