A bond with a maturity of 5 years, has a face value of $1,000,000 and a coupon rate of 5% per year paid annually. Calculate the market value of this bond if investors are expecting a yield of 3% per year.
Hint: If you will receive $1000 in one year (maybe a bonus from your company) and in two years you will receive $1500 ( a second bonus). If you deposit those amounts (received in 1 year and in 2 years ) in a deposit account at a rate of 5% per year. How much money you will have in 6 years.