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Axel is a pharmaceutical company which recently aligned with Starbucks and Dunkin Brands to patent zero-calorie,...

Axel is a pharmaceutical company which recently aligned with Starbucks and Dunkin Brands to patent zero-calorie, flavored coffee. To finance this project, Axel issued 15-year, noncallable, 6.0% annual coupon bonds at a par value of $1,000. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that these bonds now have 4 years left to maturity (N=4)?

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Answer #1

Calculate the current price of the bond as follows:

Therefore, the current price of the bond is $1,017.53.

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