Question

5. The valuation of bonds Booker Petroleum Refiners (BPR) has an issue of 5-year, 9% annual coupon bonds outstanding. The bonds, which were originally issued 15 years ago, have a face value (FV) of $1,000, a yield-to-maturity (YTM) of 12%, and are noncallable. What is the current market price of BPR's bonds? 0 $758.08 0 $981.05 0 $1,114.83 O $891.86 Are the bonds of Booker Petroleum Refiners selling at a discount, at par, or at a premium? O Par O Premium O Discount

Answer 1

K = N

Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N

k=1

K =5

Bond Price =∑ [(9*1000/100)/(1 + 12/100)^k]     +   1000/(1 + 12/100)^5

k=1

Bond Price = 891.86

Using Calculator: press buttons "2ND"+"FV" then assign

PMT = Par value * coupon %=1000*9/(100)

I/Y =12

N =5

FV =1000

CPT PV

Using Excel

=PV(rate,nper,pmt,FV,type)

=PV(12/(100),5,-9*1000/(100),-1000,)

Selling at discount as price is less than par