Question

RJR Nabisco recently experienced a market reevaluation due to a number of tobacco lawsuits. The firm has a bond outstanding with 15 years to maturity, and a coupon rate of 8 percent, with interest being paid semiannually. The required yield to maturity has risen to 16%. What is the price of the RJR Nabisco bond? a) $1,000 b) $804 c) $767 d) $550

Answer 1

d) $550

Step-by-step explanation:

The computation of the price of the RJR bond is given below;

Given that

Future value assume be $1,000

NPER = 15 × 2 = 30

PMT = $1,000 × 8% ÷ 2 = $40

RATE = 16% ÷ 2 = 8%

The formula is shown below:

=-PV(RATE,NPER,PMT,FV,TYPE)

After applying the above formula, the present value is $550