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A $1,000 par value, 10 years corporate bond issued by ABC Company promises to pay an annual coupon of 6.5% and pay back the principle or par value on maturity date, July 15, 2025. Today, the discount rate on future payments (yield to maturity) is 5.3%. The price of the bond today will be:

Annual coupon payment = $1,000 x 0.065 = $65.00

Present value of coupon stream = = 𝑃𝑃𝑃𝑃𝑃𝑃 𝑃𝑃 1−1/(1+𝑟𝑟)𝑛𝑛𝑟𝑟

Present value of coupon stream = 65 𝑃𝑃 1−1/(1+0.053)100.053 = $494.68

Present value of par value = $1,000 x 1(1+0.053)10 = $596.65

Bond price = $494.68 + $596.65 = $ 1,091.33

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