The current price of the bonds is $1,281.57.
given Grossnickle corporation issued 20-year, noncallable, 7.4% annual coupon bonds at their par value of $1,000 one year ago. today, the market interest rate on these bonds is 5.5%
To calculate the current price of the bonds, we need to use the present value formula. The formula is Price = Coupon Payment x (1 - (1 + Interest Rate) ^ -n) / Interest Rate + Face Value x (1 + Interest Rate) ^ -n Using the given information, the coupon payment is $74 (7.4% of $1,000), the interest rate is 5.5%, the face value is $1,000, and the number of years to maturity is 19. Plugging in these values into the formula gives us:
Price = $74 x (1 - (1 + 0.055) ^ -19) / 0.055 + $1,000 x (1 + 0.055) ^ -19.
Calculating this equation, we find that the current price of the bonds is approximately $1,281.57.
correct option is A