Question

Madsen Motors's bonds have 23 years remaining to maturity. Interest is paid annually; they have a $1,000 par value; the coupon interest rate is 8.5%; and the yield to maturity is 7%. What is the bond's current market price? Round your answer to the nearest cent.

Answer 1

Bond Price = PV of Cash flows from it.

Year	CF	PVF @7%	Disc CF
1	$      85.00	0.9346	$      79.44
2	$      85.00	0.8734	$      74.24
3	$      85.00	0.8163	$      69.39
4	$      85.00	0.7629	$      64.85
5	$      85.00	0.7130	$      60.60
6	$      85.00	0.6663	$      56.64
7	$      85.00	0.6227	$      52.93
8	$      85.00	0.5820	$      49.47
9	$      85.00	0.5439	$      46.23
10	$      85.00	0.5083	$      43.21
11	$      85.00	0.4751	$      40.38
12	$      85.00	0.4440	$      37.74
13	$      85.00	0.4150	$      35.27
14	$      85.00	0.3878	$      32.96
15	$      85.00	0.3624	$      30.81
16	$      85.00	0.3387	$      28.79
17	$      85.00	0.3166	$      26.91
18	$      85.00	0.2959	$      25.15
19	$      85.00	0.2765	$      23.50
20	$      85.00	0.2584	$      21.97
21	$      85.00	0.2415	$      20.53
22	$      85.00	0.2257	$      19.19
23	$      85.00	0.2109	$      17.93
23	$ 1,000.00	0.2109	$    210.95
Price of Bond			$ 1,169.08