Question

Calculate the current price of a $1,000 par value bond that has a coupon rate of 9 percent, pays coupon interest annually, has 14 years remaining to maturity, and has a current yield to maturity (discount rate) of 15 percent. (Round your answer to 2 decimal places and record without dollar sign or commas).

Answer 1

Information provided:

Par value= future value= $1,000

Coupon rate= 9%

Coupon payment= 0.09*1,000= $90

Yield to maturity= 15%

Time= 14 years

The current price of the bond is calculated by computing the present value.

Enter the below in a financial calculator to compute the present value:

FV= 1,000

PMT= 90

I/Y= 15

N= 14

Press the CPT key and PV to calculate the present value.

The value obtained is 656.53.

Therefore, the current price of the bond is 656.53.

In case of any query, kindly comment on the solution.