Question

In: Finance

Madsen Motors's bonds have 20 years remaining to maturity. Interest is paid annually, they have a...

Madsen Motors's bonds have 20 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 6%, and the yield to maturity is 8%. What is the bond's current market price? Round your answer to the nearest cent.

Solutions

Expert Solution

Computation Of Bond Price
a Annual Coupon Amount $                       60.00
b Present Value Annuity Factor for (20 Years,8%) 9.818147
c Present Value Of Annual Interest (a*b) $                    589.09
d Redemption Value $                 1,000.00
e Present Value Of (20 Years,8%) 0.21455
g Present Value Of Redemption Amount (d*e) $                    214.55
f Bond Price(c+g) $                    803.64

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