Renfro Rentals has issued bonds that have a 8% coupon rate, payable semiannually

Finance Oct 26, 2020

Renfro Rentals has issued bonds that have a 8% coupon rate, payable semiannually. The bonds mature in 16 years, have a face value of $1,000, and a yield to maturity of 10%. What is the price of the bonds? Round your answer to the nearest cent.

Expert Solution

Computation of Price of Bonds using PV Function in Excel:

=-pv(rate,nper,pmt,fv)

Here,

PV = Price of Bond = ?

Rate = 10%/2 = 5%

Nper = 16 years*2 = 32 Semiannual Periods

PMT = $1,000*8%/2 = $40

FV = $1,000

Substituting the values in formula:

=-pv(5%,32,40,1000)

PV or Price of Bonds = $841.97

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