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RJR Nabisco recently experienced a market reevaluation due to a number of tobacco lawsuits. The firm...

RJR Nabisco recently experienced a market reevaluation due to a number of tobacco lawsuits. The firm has a $1,000 par value bond outstanding with 15 years to maturity and a coupon rate of 8% with interest being paid semiannually. The required yield to maturity has risen to 16%. What is the price of the RJR Nabisco bond?

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Answer #1
                  K = Nx2
Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2
                   k=1
                  K =15x2
Bond Price =∑ [(8*1000/200)/(1 + 16/200)^k]     +   1000/(1 + 16/200)^15x2
                   k=1
Bond Price = 549.69
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