Perry's Pizzeria issued 20-year annual coupon bonds one year ago at a coupon rate of 5.1 percent. If the YTM on these bonds is 8.99 percent, what is the current bond price?
Information provided:
Face value= future value= $1,000
Time= 20 years - 1 year= 19 years
Coupon rate= 5.1%
Coupon payment= 0.051*1,000= $51
Yield to maturity= 8.99%
The current price of the bond is calculated by computing the present value.
Enter the below in a financial calculator to compute the present value:
FV= 1,000
PMT= 51
I/Y= 8.99
N= 19
Press the CPT key and PV to compute the present value.
The value obtained is 651.60.
Therefore, the current price of the bond is $651.60.
In case of any query, kindly comment on the solution.
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