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OlgaM077 [116]
3 years ago
7

Vulcan, Inc., has 8.7 percent coupon bonds on the market that have 10 years left to maturity. The bonds make annual payments and

have a par value of $1,000. If the YTM on these bonds is 10.7 percent, what is the current bond price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Business
1 answer:
Lana71 [14]3 years ago
6 0

Answer:

$880.72

Explanation:

Bond price will be calculated by following formula

Bond Price = C x [ ( 1 - ( 1 + r )^-n ) / r ] + [ F x ( 1 + r )^-n ]

Bond Price = $87 x [ ( 1 - ( 1 + 0.107 )^-10 ) / 0.107 ] + [ $1,000 x ( 1 + 0.107 )^-10 ]

Bond Price = $87 x [ ( 1 - ( 1.107 )^-10 ) / 0.107 ] + [ $1,000 x ( 1.107 )^-10 ]

Bond Price = $87 x [ ( 1 - ( 1.107 )^-10 ) / 0.107 ] + [ $1,000 x ( 1.107 )^-10 ]

Bond Price = $518.87 + $361.85

Bond Price = $880.72

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