Question

Vulcan, Inc., has 8 percent coupon bonds on the market that have 8 years left to maturity. The bonds make annual payments and have a par value of $1,000. If the YTM on these bonds is 10 percent, what is the current bond price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.G., 32.16.)

Answer 1

market price per bond = $893.30

Explanation:

in order to determine the market price of the bonds we must calculate the present value of the face value and the present value of the coupon payments:

present value of face value = $1,000 / (1 + 10%)⁸ = $466.51

present value of coupon payments = $80 x 5.3349 (PV annuity factor, 10%, 8 periods) = $426.79

market price = $893.30