Question

Calculate the current price of a $1,000 par value bond that has a coupon rate of 17 percent, pays coupon interest annually, has 12 years remaining to maturity, and has a current yield to maturity (discount rate) of 8 percent. (Round your answer to 2 decimal places and record without dollar sign or commas).

Answer 1

Answer:

Bond Price​= $1,678.24

Explanation:

Giving the following information:

Price= $1,000

Cupon rate= 17%

Years to maturiy= 12

YTM= 8%

To calculate the current price of the bond, we need to use the following formula:

Bond Price​= cupon*{[1 - (1+i)^-n] / i} + [face value/(1+i)^n]

Bond Price​= 170*{[1 - (1.08^-12)] / 0.08} + [1,000/(1.08^12)]

Bond Price​= 1,281.13 + 397.11

Bond Price​= $1,678.24