A company has a $1000 par value bond outstanding paying annual interest of 8%

Business Oct 05, 2020

A company has a $1000 par value bond outstanding paying annual interest of 8%. The bond matures in 20 years. If the present yield to maturity for this bond is 10%, calculate the current price of the bond. Use annual analysis.

Expert Solution

FV = par value = 1000
Annual payment = 1000 * 8% = 80
Number of years = 20
Discount Rate = yield to maturity = 10%
By a financial calculator, or EXCEL commend "=PV(10%,20,80,1000)"
we can compute the present value of the bond is PV = $829.73
It is equal to the current price of the bond.

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote