Madsen Motors's bonds have 5 years remaining to maturity. Interest is paid annually; they have a $1,000 par value; the coupon interest rate is 6.5%; and the yield to maturity is 13%. What is the b...

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Madsen Motors's bonds have 5 years remaining to maturity. Interest is paid annually; they have a $1,000 par value; the coupon interest rate is 6.5%; and the yield to maturity is 13%. What is the b...

Madsen Motors's bonds have 5 years remaining to maturity. Interest is paid annually; they have a $1,000 par value; the coupon interest rate is 6.5%; and the yield to maturity is 13%. What is the bond's current market price? Round your answer to the nearest cent.

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Answer 1

Answer #1

Market price is the present value of all coupon payments and the redemption amount

= 1,000*6.5%*PVAF(13%, 5 years) + 1,000*PVF(13%, 5 years)

= 65*3.517 +1,000*0.543

= $771.61

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Answer 2

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Madsen Motors's bonds have 5 years remaining to maturity. Interest is paid annually; they have a $1,000 par value; the coupon interest rate is 6.5%; and the yield to maturity is 13%. What is the b...