Question

Gugenheim, Inc., has a bond outstanding with a coupon rate of 7.1 percent and annual payments. The yield to maturity is 8.3 percent and the bond matures in 23 years. What is the market price if the bond has a par value of $2,000?

Answer 1

$1,757.05

Step-by-step explanation:

In this question, we use the PV formula which is shown in the spreadsheet.

The NPER represents the time period.

Given that,

Future value = $2,000

PMT = 2000 × 7.1% = $142

NPER = 23 years

Rate of interest = 8.3%

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

So, after solving this, the present value would be $1,757.05