Question

Carnival Corp issues a 9 percent coupon bond with 20 years maturity and $1,000 face (par) value. If the yield to maturity of this bond is 12 percent, find the bond's price. Group of answer choices

a. $775.92
b. $620.74
c. none of the answers is correct
d. $811.25
e. $1,009.68

Answer 1

a. $775.92

Step-by-step explanation:

For determining the bond price we have to use the present value formula i.e to be shown in the attachment below:

Given that,

Future value = $1,000

Rate of interest = 12%

NPER = 20 years

PMT = $1,000 × 9% = $90

The formula is shown below:

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

So, after applying the above formula we can get the price of the bond is $775.92