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Portland Brewery Inc. recently issued 30-year ​$1,000 face​ value, 12% annual coupon bonds. The market discount...

Portland Brewery Inc. recently issued 30-year ​$1,000 face​ value, 12% annual coupon bonds. The market discount rate for this bond is only​ 7%. What is the current price of this​ bond?

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Answer #1
The current price of a bond is the sum total of the PV of the expected cash
flows from the bond, if it is held till maturity, the discount
rate being the market interest rate of 7%:
The expected cash flows from the bond are:
*the maturity value of $1000, receivable at EOY 30, and
*the annual interest payments of $120 for 30 years,
which constitutes an annuity.
Value of the bond = 1000/1.07^30+120*(1.07^30-1)/(0.07*1.07^30) = $      1,620.45
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