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3. Valuing Bonds [LO2] Even though most corporate bonds in the United States make coupon payments...

3. Valuing Bonds [LO2] Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 23 years to maturity, and a coupon rate of 5.8 percent paid annually. If the yield to maturity is 4.7 percent, what is the current price of the bond?

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Answer #1

Current Price Of Bond = Coupon Amount * PVAF (YTM, n) + Redeemption Amount * PVIF ( YTM,n)

                         = 58 * PVAF (4.7%, 23) + 1000 * PVIF (4.7%,23)

                       = 58 * 13.8783 + 1000 * 0.3477

                          = 804.9414 + 347.7

                            =$ 1152.6414

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