Grossnickle Corporation issued 20-year, noncallable, 9.4% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 19 years to maturity? a. $1,714.18 b. $1,496.28 c. $1,452.70 d. $1,583.44 e. $1,539.86
current price of the bonds c. $1,452.70 | |
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Please find below the answer | |
Statementshowing Computations | |
Paticulars | Amount |
PV of Coupon payments = 94*11.60765 | 1,091.12 |
PV of Face value to be received at end of 19 Years = 1000*.36158 | 361.58 |
Market price of bond | 1,452.70 |
Time | PVF at 5.5% |
1.00 | 0.94787 |
2.00 | 0.89845 |
3.00 | 0.85161 |
4.00 | 0.80722 |
5.00 | 0.76513 |
6.00 | 0.72525 |
7.00 | 0.68744 |
8.00 | 0.65160 |
9.00 | 0.61763 |
10.00 | 0.58543 |
11.00 | 0.55491 |
12.00 | 0.52598 |
13.00 | 0.49856 |
14.00 | 0.47257 |
15.00 | 0.44793 |
16.00 | 0.42458 |
17.00 | 0.40245 |
18.00 | 0.38147 |
19.00 | 0.36158 |
PVF for 19 Years | 11.60765 |
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