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Johnson motor's bonds have 10 years remaining to maturity
Johnson motor's bonds have 10 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon rate is 8 percent. the bonds have a yield to maturity of 9%. what is the current market price of these bonds?
Expert Solution
Computation of Current Market Price of Bonds using PV Function in Excel:
=-pv(rate,nper,pmt,fv)
Here,
PV = Current Market Price of Bonds = ?
Rate = Yield to Maturity = 9%
Nper = Number of Years = 10 years
PMT = Coupon Payment = $1,000*8% = $80
FV = Face Value = $1,000
Substituting the values in formula:
=-pv(9%,10,80,1000)
PV or Current Market Price of Bonds = $935.82
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