Question

Calculate the current price of a $1,000 par value bond that has a coupon rate of 9 percent, pays coupon interest annually, has 23 years remaining to maturity, and has a current yield to maturity (discount rate) of 14 percent. (Round your answer to 2 decimal places and record without dollar sign or commas).

Answer 1

K = N

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

k=1

K =23

Bond Price =∑ [(9*1000/100)/(1 + 14/100)^k]     +   1000/(1 + 14/100)^23

k=1

Bond Price = 660.4