Question

Aloha Inc. has 5 percent coupon bonds on the market that have 6 years left to maturity. If the YTM on these bonds is 6.52 percent, what is the current bond price? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Answer 1

Answer:

926.46  

Explanation:

The approaches I have chosen in determining the current bond price are a financial calculator and excel formula approaches as shown thus:

Financial calculator:

N=6( number of annual coupons in 6 years left to maturity)

I/Y=6.52( the yield on the bond)

PMT=50 (annual coupon=face value*coupon rate=$1000*5%)

FV=1000( face   value which is $1000)

CPT PV=-$926.46  

Excel PV function:

=-pv(rate,nper,pmt,fv)

=-pv(6.52%,6,50,1000)=-$926.46