Answer:
Ans. The value of this coupon is $1,000
Explanation:
Hi, we have to bring to present value the annual coupons and the principal to be paid in ten years with a 10% discount rate. Take into account that the coupon is going to be $100 (10%*1000). The formula and the math as follows.
[tex]Price=\frac{Coupon((1+Disc.Rate)^{n-1}-1) }{Disc.Rate(1+Disc.Rate)^{n-1} } +\frac{(coupon+FaceValue)}{(1+Disc.Rate)^{n} }[/tex]
n= years
[tex]Price=\frac{100((1+0.1)^{9}-1) }{0.1(1+0.1)^{9} } +\frac{(100+1000)}{(1+0.1)^{10} }=1000[/tex]
Best of luck.
