In: Finance
Cullumber Corp is issuing a 10-year bond with a coupon rate of 11 percent. The interest rate for similar bonds is currently 5 percent. Assuming annual payments, what is the value of the bond?
The Value of the Bond
Variables |
Financial Calculator Keys |
Figures |
Par Value/Face Value of the Bond [$1,000] |
FV |
1,000 |
Coupon Amount [$1,000 x 11.00%] |
PMT |
110 |
Market Interest Rate or Yield to maturity on the Bond [5.00%] |
1/Y |
5.00 |
Maturity Period/Time to Maturity [10 Years] |
N |
10 |
Bond Price |
PV |
? |
Here, we need to set the above key variables into the financial calculator to find out the Price of the Bond. After entering the above keys in the financial calculator, we get the Price of the Bond (PV) = $1,463.30.
“Hence, the Value of the Bond will be $1,463.30”