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Bonds issued at 15-year, noncallable, at 10% annual coupon bonds at par value of $1000. Today, the market interest rate is 5.5%. What is the current price of the bonds, if they now have 14 years to maturity?

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akindelemf

Answer:

The current price of the bonds, if they now have 14 years to maturity is $1431.53

Explanation:

From the question,

N = 14

PMT = 0.1 x 1000 = 100

R = 0.055  

FV = 1000

PV = ?

Using Excel function PV = PV(R,N,PMT,FV)

PV(0.055, 14, -100 ,-1000)

= 1431.53

= $1431.53

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