Question

Jackson Corporation's bonds have 5 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 6.5%. The bonds have a yield to maturity of 5%. What is the current market price of these bonds? Round your answer to the nearest cent.

$

Answer 1

K = N

Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N

k=1

K =5

Bond Price =∑ [(6.5*1000/100)/(1 + 5/100)^k]     +   1000/(1 + 5/100)^5

k=1

Bond Price = 1064.94