Question

A company has 6 percent coupon bonds that have 9 years left to maturity. The bonds...

A company has 6 percent coupon bonds that have 9 years left to maturity. The bonds make annual payments to their holders. The YTM on these bonds is 9 percent. Calculate the current bond price.

a. $779.14

b.$1,208.05

c. $820.14

d. $1,030.00

e. none of the above

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Answer #1

Using financial calculator BA II Plus - Input details:

#

I/Y = R = Rate or yield / frequency of coupon in a year =

             9.000000

PMT = Coupon rate x FV / frequency =

-$60.00

N = Number of years remaining x frequency =

9

FV = Future Value =

-$1,000.00

CPT > PV = Present value of bond =

$820.14

Formula for bond value = |PMT| x ((1-((1+R%)^-N)) / R%) + (|FV|/(1+R%)^N)

$820.14

Correct option is > c. 820.14

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