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Bright Sun Inc

Finance

Bright Sun Inc. Sold an issue of 30-year $1,000 par value bonds to the public. The Bonds had a 13.49 percent coupon rate and paid interest annually. It is now 19 years later. The current market rate of interest on the bright sun bonds is 8.12 percent. What is the current market price (intrinsic value) of the bonds?

 

Round the answer to two decimal places.

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Computation of Current Market Price of Bonds using PV Function in Excel:

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

Here,

PV = Current Market Price of Bonds = ?

Rate = 8.12%

Nper = 30 years - 19 years = 11 years 

PMT = 1000*13.49% = 134.90

FV = 1000

Substituting the values in formula:

=-pv(8.12%,11,134.90,1000)

PV or Current Market Price of Bonds = $1,381.14

So, current market price (intrinsic value) of the bonds is $1,381.14

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