Question

g Boeing corporation issued a 25-year bond in 1999. The bond has a stated face value of $10,000 dollars and an annual coupon rate of 4.5%. Suppose you bought the bond in January of 1999 and would like to sell the bond in January 2023. The current interest rate on comparable bonds in January 2023is 6.25%. Calculate the price at whichyou could sell your bond.

Answer 1

price of bond in 2023 = $9835.29

Step-by-step explanation:

given data

face value = $10,000

annual coupon rate = 4.5%

current interest rate = 6.25%

to find out

Calculate price at which you could sell your bond

solution

first we get here coupon payment that is express as

coupon payment = annual coupon rate × face value ......................1

put here value

coupon payment = 4.5% × 10000

coupon payment = 450

so here price of bond in 2023 will be

price of bond in 2023 =
`(coupon\ payment)/(1+current\ interest\ rate) +(face\ value)/(1+current\ interest\ rate)` ..................2

put here value

price of bond in 2023 =
`(450)/(1+0.0625) +(10000)/(1+0.0625)`

price of bond in 2023 = $9835.29