Question

Grossnickle corporation issued 20-year, noncallable, 7.5% annual coupon bonds at their par value of $1,000 one year ago. today, the market interest rate on these bonds is 5.5%. what is the current price of the bonds, given that they now have 19 years to maturity?

Answer 1

Bond valuation:
Par value = Maturity value = FV = $1,000
Coupon rate = 7.5%
Years to maturity = N = 19
Required rate = I/YR = 5.5%
(Coupon rate)(Par value) = PMT = $75
PV = $1,232.15