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Homework answers / question archive / Company A has issued bonds that have a 10% coupon rate, payable annually

Company A has issued bonds that have a 10% coupon rate, payable annually

Finance

Company A has issued bonds that have a 10% coupon rate, payable annually. The bonds mature in 5 years, have a face value of 1000$, and YTM of 8.5%. What is the price of the bonds?

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    K = N
Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N
                   k=1
 
                  K =5
Bond Price =∑ [(10*1000/100)/(1 + 8.5/100)^k]     +   1000/(1 + 8.5/100)^5
                   k=1
 
Bond Price = 1059.11
Using Calculator: press buttons "2ND"+"FV" then assign
 
 
PMT = Par value * coupon %=1000*10/(100)
I/Y =8.5
N =5
FV =1000
CPT PV
 
Using Excel
=PV(rate,nper,pmt,FV,type)
=PV(8.5/(100),5,-10*1000/(100),-1000,)

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