# You have just purchased a 10-year, $1,000 par value bond, The coupon rate is 8% annually, with... ## Question: You have just purchased a 10-year,$1,000 par value bond, The coupon rate is 8% annually, with interest being paid each 6 months.

If you expect to earn a 10% nominal rate of return on this bond, how much did you pay for it

a. 1,122.87

b. 1,003.42

c. 875.38

d. 950.75

e. 812.15

The correct choice is Option C.

Bond Price is given as:

Here,

M = Maturity Amount = $1,000.00 n = Number of periods to maturity = 10 x 2 = 20 C = Periodic coupon = 1000 x 8% x 1/2 =$40.00

i = Periodic yield = 10 / 2 = 5% = 0.05

Thus,

Bond Price = \$875.38