Answer:
The correct answer is $1,029.41.
Explanation:
According to the scenario, the given data are as follows:
Coupon bond = 7%
Face value = $1,000
Current yield = 6.8%
So, we can calculate the current price of this bond by using following formula:
Current price = Annual cash flows / Current yield
Where, Annual cash flow = Face value × Coupon bond
= $1,000 × 7%
= $70
So, by putting the above value, we have
Current price = 70 / 6.8%
= 70 / 0.068
= $1,029.41
Hence, the current price of this bond is $1,029.41.
