If Helga Inc. issued a bond that is currently selling for $950 has 7 years left until maturity and currently as a 10.4%...
If Helga Inc. issued a bond that is currently selling for $950 has 7 years left until maturity and currently as a 10.4% yield to maturity. What must the bond’s coupon price be?
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$109.21 |
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$93.59 |
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$301.83 |
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$46.88 |
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None of these |
Homework Answers
Current value=Annual coupon*Present value of annuity factor(10.4%,7)+$1000*Present value of discounting factor(10.4%,7)
950=Annual coupon*4.80496295+1000*0.500283853
Annual coupon=(950-500.283853)/4.80496295
=$93.59(Approx).
NOTE:
1.Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate
=Annual coupon[1-(1.104)^-7]/0.104
=Annual coupon*4.80496295
2.Present value of discounting factor=1000/1.104^7
=1000*0.500283853
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