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Homework answers / question archive / Callaghan Motors' bonds have 10 years remaining to maturity
Callaghan Motors' bonds have 10 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 11%, and the yield to maturity is 6%. What is the bond's current market price? Round your answer to the nearest cent.
| Bond's current market price | 1368.00 |
| Workings: | |||
| Annual interest | 110 | =1000*11% | |
| Amount | PV factor 6% | Present value | |
| Annual interest | 110 | 7.36009 | 809.61 |
| Principal | 1000 | 0.55839 | 558.39 |
| Total | 1368.00 | ||
| PV factor 6% | |||
| Annual interest | 7.36009 | =(1-(1.06)^-10)/0.06 | |
| Principal | 0.55839 | =1/1.06^10 | |
