Question

Grohl Co. issued 13-year bonds a year ago at a coupon rate of 7 percent. The bonds make semiannual payments. If the YTM on these bonds is 10 percent, what is the current bond price?

Answer 1

Price of Bond = PV of future CFs from it.

Period	CF	PVF @5%	Disc CF
1	$      35.00	0.9524	$   33.33
2	$      35.00	0.9070	$   31.75
3	$      35.00	0.8638	$   30.23
4	$      35.00	0.8227	$   28.79
5	$      35.00	0.7835	$   27.42
6	$      35.00	0.7462	$   26.12
7	$      35.00	0.7107	$   24.87
8	$      35.00	0.6768	$   23.69
9	$      35.00	0.6446	$   22.56
10	$      35.00	0.6139	$   21.49
11	$      35.00	0.5847	$   20.46
12	$      35.00	0.5568	$   19.49
13	$      35.00	0.5303	$   18.56
14	$      35.00	0.5051	$   17.68
15	$      35.00	0.4810	$   16.84
16	$      35.00	0.4581	$   16.03
17	$      35.00	0.4363	$   15.27
18	$      35.00	0.4155	$   14.54
19	$      35.00	0.3957	$   13.85
20	$      35.00	0.3769	$   13.19
21	$      35.00	0.3589	$   12.56
22	$      35.00	0.3418	$   11.96
23	$      35.00	0.3256	$   11.39
24	$      35.00	0.3101	$   10.85
24	$ 1,000.00	0.3101	$ 310.07
Price of Bond			$ 793.02