Callaghan Motors' bonds have 10 years remaining to maturity

Accounting Nov 22, 2020

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.

Expert Solution

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

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