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Morin Company’s bonds mature in 3 years, have a par value of $1,000, and make an...

Morin Company’s bonds mature in 3 years, have a par value of $1,000, and make an annual coupon interest payment of $85. The discount rate is 9 on these bonds. What is the bond’s value?

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Homework Answers

Answer #1

Face value of the bond = $1000

The bond pays coupons annually

Annual coupon payment = $85

Time to maturity = 3 years

Discount rate or Yield to maturity on these bonds = YTM = 9%

Method 1: Bond's price calculation using ba ii plus calculator

Input the following values in ba ii plus calculator

N = 3

I/Y = 9

PMT = 85

FV = 1000

CPT -> PV [Press CPT and then press PV]

We get, PV = -987.3435267

Bond's price = $987.34 (Rounded to the nearest cent)

Answer ($) -> 987.34

Method 2: Bond's price calculation using Excel

We can compete the price of the Bond using the PV function in Excel as shown below:

=PV(9%,3,85,1000) = -987.34

Price of the bond = $987.34 (Rounded to nearest cent)

Answer ($) -> 987.34

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