**Bond valuation**

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—**Annual interest**   Calculate the value of the bond shown in the following​ table, assuming it pays interest *annually*.  ​(Click on the icon here    in order to copy the contents of the data table below into a​ spreadsheet.)




**Par value**

**Coupon interest rate**

**Years to maturity**

**Required return**

​$

1 comma 000

1,000

12

12​%

10

10

8

8​%
















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Part 1

The value of the bond is ​$




enter your response here

.  ​(Round to the nearest​ cent.)


To calculate the value of a bond, we can use the following bond valuation formula:

\[
\text{Bond Value} = \sum_{t=1}^{N} \frac{C}{(1+r)^t} + \frac{F}{(1+r)^N}
\]

Where:
- $ C $ = Coupon payment (Annual interest payment, which is Par Value * Coupon Interest Rate)
- $ r $ = Required return or discount rate (as a decimal)
- $ F $ = Par Value (Face Value of the bond)
- $ N $ = Number of years to maturity

Now, let's substitute the given values:

- Par value $ F $ = 1,000
- Coupon interest rate = 12% (so, the coupon payment $ C $ = 12% of $1,000 = $120)
- Years to maturity $ N $ = 10
- Required return $ r $ = 8% (or 0.08)

Now, we can compute each component and sum the present values of all future coupon payments and the par value repayment.

Let me calculate that for you.The value of the bond is approximately **$1,268.40** (rounded to the nearest cent).

Would you like further details or have any other questions? 

Here are 5 related questions to expand on the topic:
1. How does the required return affect the bond's price?
2. What is the difference between a bond's coupon rate and its yield?
3. How would the bond value change if interest payments were semiannual instead of annual?
4. What is the relationship between bond prices and interest rates?
5. How does bond maturity impact its sensitivity to interest rate changes?

**Tip:** A bond’s price moves inversely with interest rates—when rates rise, bond prices fall, and vice versa.

Calculate the value of the bond shown in the following table, assuming it pays interest annually. Par value = $1,000, Coupon interest rate = 12%, Years to maturity = 10, Required return = 8%. The value of the bond is _____.

Learn how to calculate the value of a bond with a par value of $1,000, a 12% coupon rate, and 10 years to maturity, assuming a required return of 8%. This problem demonstrates key financial concepts such as present value and bond valuation.

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