Question
Timmons Ltd. has 9% p.a. coupon rate bonds, with an annual coupon, on the market with...
Timmons Ltd. has 9% p.a. coupon rate bonds, with an annual coupon, on the market with 8 years left to maturity. The yield to maturity is 8% p.a. Assuming a face value of $1,000, what is the bond's current price?
| a. |
$1,057.47 |
|
| b. |
$1,000.00 |
|
| c. |
$944.65 |
|
| d. |
$1,028.20 |
|
| e. |
$1,087.86 |
Homework Answers
Answer #1
The bond's current price equals the present value of all future payments (annual coupons + face value to be recieved at the end of the maturity period) .
This can computed by both excel function =PV and also by present value equations as below:
The bond's current price is $1,057.47 (option a)
Workings:
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