Question

Gugenheim, Inc., has a bond outstanding with a coupon rate of 7.8 percent and annual payments. The yield to maturity is 9 percent and the bond matures in 16 years. What is the market price if the bond has a par value of $2,000?

$1,800.50

$1,836.51

$1,803.27

$1,805.64

Answer 1

Ans:- In this question, we need to find the market price of the bond that means the Present Value of the bond. we will use the PV function of excel to find the Present Value of the bond.

Rate=9%, Nper=16, Pmt= -$2000 * 7.8% = -$156, FV = -$2,000.

Therefore, the market price of the bond is $1800.50. option (a) is the right answer.

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