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ANEK [815]
3 years ago
8

Morin Company's bonds mature in 8 years, have a par value of $1,000, and make an annual coupon interest payment of $65. The mark

et requires an interest rate of 6.1% on these bonds. What is the bond's price
Business
1 answer:
never [62]3 years ago
5 0

Answer:

The bond price is $1024.74.

Explanation:

Given,

time, t= 8 year

Maturity value, F = $1,000

interest rate, r = 6.1%

Coupon, C = $65

Bond's price = C [ \dfrac{(1-[1+r]^{-t} )}{r} ] + \dfrac{F}{[1+r]^t}

= 65 [ \dfrac{(1-[1+0.061]^{-8})}{0.061}] +\dfrac{1000}{[1+0.061]^8}

= 65 [\dfrac{ (1- \dfrac{1}{1.6059})}{0.061}] + \dfrac{1000}{1.6059}

= 65 [ \dfrac{(1 - 0.6227)}{0.061}] +\dfrac{1000}{1.6059}

=65\times [ 6.1852] + 622.70

=$1024.74.

Hence, the bond price is $1024.74.

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