Question

Company A issued 15-year, noncallable, 8% annual coupon bonds at their par value of $1,000 one...

Company A issued 15-year, noncallable, 8% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 8%. What is the current price of the bonds, given that they now have 14 years to maturity?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Coupon Rate = 8% or 0.08

Face Value = $1000

Coupon Amount = $1000 * 0.08

= $80

Year to maturity (n) = 14 years

Market Interest Rate (r) = 8% or 0.08

Price of the Bond = Coupon Amount * Present Value Annuity Factor (r,n) + Face Value * Present Value Interest Factor (r,n)

= 80 * 8.2442 + 1000 * 0.3405

= 659.54 + 340.46

= $1000

Bond Price = $1000

As the Interest Rate and Coupon Rate are same, so Bond Price should trade at par i.e., at $1000

Note - Present Value Annuity Factor (8%,14) can be calculated in excel by using formula =-PV(8%,14,1) and Present Value Interest Factor (8%,14) by =1/((1+0.08)^(14))

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
One year ago Lerner and Luckmann Co. issued 15-year, noncallable, 8.7% annual coupon bonds at their...
One year ago Lerner and Luckmann Co. issued 15-year, noncallable, 8.7% annual coupon bonds at their 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 they now have 14 years to maturity? Select the correct answer. a. $1,306.87 b. $1,312.83 c. $1,315.81 d. $1,318.79 e. $1,309.85
One year ago Lerner and Luckmann Co. issued 15-year, noncallable, 9% annual coupon bonds at their...
One year ago Lerner and Luckmann Co. issued 15-year, noncallable, 9% annual coupon bonds at their 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 they now have 14 years to maturity? Select the correct answer. a. $1,338.48 b. $1,341.32 c. $1,332.80 d. $1,335.64 e. $1,344.16
One year ago Lerner and Luckmann Co. issued 15-year, noncallable, 5.9% annual coupon bonds at their...
One year ago Lerner and Luckmann Co. issued 15-year, noncallable, 5.9% annual coupon bonds at their 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 they now have 14 years to maturity? Select the correct answer. a. $1,043.24 b. $1,045.68 c. $1,038.36 d. $1,040.80 e. $1,035.92
. Leggio Corporation issued 25-year, 7.25% semiannual coupon bonds at their par value of $1,000 one...
. Leggio Corporation issued 25-year, 7.25% semiannual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds has dropped to 7%. What is the new price of the bonds, given that they now have 24 years to maturity? (4 points)
Ryngaert Inc. recently issued noncallable bonds that mature in 15 years. They have a par value...
Ryngaert Inc. recently issued noncallable bonds that mature in 15 years. They have a par value of $1,000 and an annual coupon of 5.7%. If the current market interest rate is 7.7%, at what price should the bonds sell?
The Chef Co. issued 15-year bonds one year ago today. The coupon rate of the bonds...
The Chef Co. issued 15-year bonds one year ago today. The coupon rate of the bonds was 4.8% and the bonds make semi-annual coupon payments. The Yield-To-Maturity of these bonds is currently 5.3%. Required: Calculate the current dollar price assuming a $1,000 par value.
1) One year ago, ShopFast issued 15-year annual bonds at par. The bonds had a coupon...
1) One year ago, ShopFast issued 15-year annual bonds at par. The bonds had a coupon rate of 6.5 percent and had a face value of $1,000. Today, the applicable yield to maturity to ShopFast’s bonds is 7%. What was the change in price in ShopFast’s bonds from last year to today? A) -55.56t B) 51.94 C) -$43.73 D) 58.71 E) The bond price did not change. 2) WallStores needs to raise $2.8 million for expansion. The firm wants to...
Company A issued 10-year bonds one year ago at par. Each of these bonds had $1,000...
Company A issued 10-year bonds one year ago at par. Each of these bonds had $1,000 face value and had a coupon rate of 4.25% per year, with semi-annual coupon payments. Company A's credit risk hasn’t changed, but the market has—and now 10-year corporate bonds with similar risk are being issued with a yield-to-maturity of 3.75% per year. One year ago, what was the required rate of return on these bonds? What is your best guess of the current required...
One year ago, XYZ Co. issued 15-year bonds at par. The bonds have a coupon rate...
One year ago, XYZ Co. issued 15-year bonds at par. The bonds have a coupon rate of 4.81 percent, paid semiannually, and a face value of $1,000. Today, the market yield on these bonds is 4.27 percent. What is the percentage change in the bond price over the past year? Answer to two decimals.  
Ryngart recently issued 15 year bonds. They have a par value of $1,000 and an annual...
Ryngart recently issued 15 year bonds. They have a par value of $1,000 and an annual coupon of 5.7%. Current market rates are 7%. In the space below answer a, b, & c: a) Should the bond trade at a premium of a discount to par value? b) What annual $ amount of interest would an investor in one of these bonds receive? c) How much should an investor be willing to pay for the bond?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT