On January 1, 2000, a corporation issued a $10,000 bond with a 6% annual coupon. The bond matures in five years; the purchaser of the bond is entitled to receive a $600 coupon payment at the end of each of the next five years. In addition, the purchaser of the bond will receive $10,000 at the end of five years.
Determine the present value of the bond at an interest rate of 6%, 8% and 4%. What formula would I use to figure these (I do not understand the additional elements of the bond)?
What do those answers tell you about what investors would be wiling to pay for the bond on January 1, 2000?