Question

Mannings Co. has 7% coupon bonds on the market that has 14 years left to maturity. The bonds make annual coupon payments. If the YTM on these bonds is 4%, what is the current bond price

Answer 1

Answer:

$1,316.89

Explanation:

Coupon rate = 7%

Years to maturity = 14

YTM = 4%

Face value or the future value = $1,000

Annual coupon payment = Coupon rate * Face value of the bond

Annual coupon payment = 7% * 1000

Annual coupon payment = $70

Current bond price = PV( Rate, Nper, -PMT, -FV)

Current bond price = PV(4%; 14, -70,-1000)

Current bond price = 1316.893688

Current bond price = $1,316.89