Question

Madsen Motors's bonds have 14 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 10%, and the yield to maturity is 11%. What is the bond's current market price? Round your answer to the nearest cent.

Answer 1

Answer:

$930.18

Explanation:

The bond's current market price is its Present Value (PV). This is calculated as:

FV = $1,000

Pmt = $1,000 × 10% = $100

i =  11%

P/yr = 1

N = 14

PV = ?

Using a financial calculator to input the values as above, the bond's current market price (PV) is $930.18