Answer:
The market price of a $1,000 face value bond is $944.
Explanation:
Market Value of Bond is calculated by following formula.
Coupon Payment = $1000 x 8% = $80
r = YTM = 8.66% = 0.0866
Face value = $1,000
n = number of periods = 16 yeasr
P = C [ (1 - ( 1 + r )^-n ) / r ] + [ F x ( 1 + r )^-n]
P = $80 [ (1 - ( 1 + 0.0866 )^-16 ) / 0.0866 ] + [ $1,000 x ( 1 + 0.0866 )^-16]
P = $80 [ (1 - ( 1 + 0.0866 )^-16 ) / 0.0866 ] + [ $1,000 x ( 1 + 0.0866 )^-16]
P = $679.19 + $264.78
P = $943.97
