Willing to pay for bond, Assume that a 15-year, $1,000 face value bond pays interest, Accounting Basics

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Willing to pay for bond

Problem:

Assume that a 15-year, $1,000 face value bond pays interest of$37.50 every 3 months. If you require a nominal annual rate of return of 12 percent, with quarterly compounding, how much should you be willing to pay for this bond? (Hint: The PVIFA and PVIF for 3 percent, 60 periods are 27.6748 and 0.1697, respectively.)

$821.92
$1,207.57
$986.43
$1,120.71
$1,358.24

Note: Please show how you came up with the solution.

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