"Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a face value of $ 1 comma 000, and a coupon rate of 7.4 % (annual payments). The yield to maturity on this bond when it was issued was 6.4 %. What was the price of this bond when it was issued?"

$ 1,072.23

Explanation:

Price of the Bond is the Present Value of the Bond.

Thus, Calculate the Present Value of this Bond

N= 10

PMT = $1,000×7.4% = $ 74

YTM = 6.4%

FV = $1,000

P/YR = 1

PV = ?

Using a Financial Calculator  PV is $ 1,072.23

$1,072.22

Explanation:

Price of the bond is the present value of all cash flows of the bond. These cash flows include the coupon payment and the maturity payment of the bond. Both of these cash flows discounted and added to calculate the value of the bond.

According to given data

Face value of the bond is $1,000

Coupon payment = C = $1,000 x 7.4% = $74 annually

Number of periods = n = 10 years

Market Rate = 6.4% annually

Price of the bond is calculated by following formula:

Price of the Bond = C x [ ( 1 - ( 1 + r )^-n ) / r ] + [ F / ( 1 + r )^n ]

Price of the Bond = $74 x [ ( 1 - ( 1 + 1.064% )^-10 ) / 1.064% ] + [ $1,000 / ( 1 + 1.064% )^10 ]

Price of the Bond = $534.47 + $537.75 = $1072.22

Price of the Bond = $5,627.25

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white lines separate lanes of traffic traveling the same direction.

hashed or broken lines means you may change lanes when it is safe.

solid white lines mean stay in your lane.

yellow lines separate traffic moving in opposing directions.

hashed or broken yellow lines mean you can carefully pass, paying attention to oncoming traffic.

never cross a solid yellow line (or double yellow line).

when turning left at an intersection, pass in front of any cars that are turning left from the opposing direction (do not try to pass behind them).

use the left lane to pass other cars traveling your direction.

do not pass in the right lane unless absolutely necessary.

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you must always yield to pedestrians.

come to a complete stop whenever you see pedestrians trying to cross the street.

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it is mandatory to pull over or stop at an intersection to allow an emergency vehicle to pass you if you see one traveling with lights flashing and/or a siren running.

do not overuse your car horn. horns are used almost exclusively for emergency situations or for when you feel unsafe.

explanation:

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