Johnson motor's bonds have 10 years remaining to maturity

Finance Oct 07, 2020

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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