Calculate the value of a bond that matures in 18 years and has a $1,000 par...
Calculate the value of a bond that matures in 18 years and has a $1,000 par value. The annual coupon interest rate is 15 percent and the market's required yield to maturity on acomparable-risk bond is 8 percent. The value of the bond is $
(Round to the nearest cent.
Homework Answers
Par Value = $1,000
Annual Coupon Rate = 15.00%
Annual Coupon = 15.00% * $1,000
Annual Coupon = $150
Annual Required Return = 8.00%
Time to Maturity = 18 years
Value of Bond = $150 * PVIFA(8.00%, 18) + $1,000 * PVIF(8.00%,
18)
Value of Bond = $150 * (1 - (1/1.08)^18) / 0.08 + $1,000 /
1.08^18
Value of Bond = $150 * 9.37189 + $1,000 * 0.25025
Value of Bond = $1,656.03
The value of the bond is $1,656.03
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