Bond problem… How should I interpret the following:
PV = -1071
FV = 1000
PMT = 60
N = 3
IY = 3% ish
Why is PV higher than FV? Why would I lend someone 1070 bucks to get 1000 bucks back at maturity? Isn’t that kind of a bad deal?
You pay $1,071 today in order to receive 3 annual coupons of $60 each and you get $1,000 at the end of year 3. Your YTM will be 3.473% annually for a total cash inflow of $1,180.
I know that I’ve seen this question somewhere before . . . .
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FV on the calculator for a bond is just the maturity amount, not the final rolled up value of all the coupons and the maturity amount. The situation you have here is for a premium bond (coupon rate > YTM).
Ty, it’s all coming back to me… you can tell i’m not an FI guy and rusty :)))
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