If a bond has a par value of $1,000 and a coupon of 6%, what is the nominal value (in dollars) of the bond if the current interest rate is 5.5%? Round to the nearest dollar.
To calculate the nominal value of the bond, we need to discount the future cash flows from the bond using the current interest rate.
The annual coupon payment on the bond is $1,000 * 6% = $60.
The present value of the coupon payments is $60 / 0.055 = $1090.91.
The present value of the par value is $1,000 / (1 + 0.055) = $952.38.
Therefore, the total nominal value of the bond is $1090.91 + $952.38 = $2043.29.
Rounded to the nearest dollar, the nominal value of the bond is $2043.