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You are eyeing an investment in a corporate bond which has a YTM of 14.00%, and a stated rate of interest of 8.00% with...

You are eyeing an investment in a corporate bond which has a YTM of 14.00%, and a stated rate of interest of 8.00% with a maturity of 7 years. What is the price of this bond?

a. $1,087.45

b. $742.70

c. $1,205.34

d. $737.64

business   finance   
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Answer #1

Answer: Option b is correct
Suppose the face value of the bond be $1000
Coupon payment=(Coupon rate)*(Face value)=8%*1000=80
YTM=14%
We can determine the price of the bond using excel

80 1 Face value $1,000 2 Payment 3 Time period 4 YTM 14% 5 Present value= ($742.70) 6 Formula used: PV/V4,V3,V2,V1)

The price of the bond =$742.70

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