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The bonds of TigerPaw, Inc

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The bonds of TigerPaw, Inc. carry a 4% annual coupon, have a $1,000 face value, and mature in 5 years. Market rate is 7%. What is the market value of Tiger's bonds? (bond valuation)

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Computation of Value of Target's Bonds using PV Function in Excel:

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

Here,

PV = Value of Tiger's Bonds = ?

Rate =7%

Nper = 5 years

PMT = $1,000*4% = $40

FV = $1,000 (assumed)

Substituting the values in formula:

=-pv(7%,5,40,1000)

PV or Value of Tiger's Bonds = $876.99

So, Value of Target's Bonds is $876.99

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