Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere...

Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 14 years to maturity, and a coupon rate of 8 percent paid annuallly. If the yield to maturity is 11 percent, what is the current price of the bond?

Multiple Choice

€830.07
€1,030.00
$751.02
€1,251.33
€790.54

Expert Solution

Price of the bond = PV of the coupon payments + PV of the par value

Price of the bond = €80({1 – [1 / (1 + 0.11)^14]} / 0.11) + €1,000[1 / (1 + 0.11)^14]

Price of the bond = €790.54

jeff jeffy answered 2 years ago

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Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere...

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