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28 November, 11:34

Bonds issued at 15-year, noncallable, at 10% annual coupon bonds at par value of $1000. Today, the market interest rate is 5.5%. What is the current price of the bonds, if they now have 14 years to maturity?

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  1. 28 November, 12:04
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    The current price of the bonds, if they now have 14 years to maturity is $1431.53

    Explanation:

    From the question,

    N = 14

    PMT = 0.1 x 1000 = 100

    R = 0.055

    FV = 1000

    PV = ?

    Using Excel function PV = PV (R, N, PMT, FV)

    PV (0.055, 14, - 100,-1000)

    = 1431.53

    = $1431.53
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