7 years ago Sunland Corporation issued 20-year bonds that had a $1,000 face value, paid interest...

7 years ago Sunland Corporation issued 20-year bonds that had a $1,000 face value, paid interest annually, and had a coupon rate of 7 percent. If the market rate of interest is 5.5 percent today, what is the current market price of an Sunland Corporation bond?

Current market price _____

Expert Solution

Number of remaining periods = 20 - 7 = 13

Annual coupon = 7% of 1000 = 70

Current market price = Coupon * [1 - 1 / (1 + rate)^time] / rate + Face value / (1 + rate)^time

Current market price = 70 * [1 - 1 / (1 + 0.055)^13] / 0.055 + 1000 / (1 + 0.055)^13

Current market price = 70 * [1 - 0.49856] / 0.055 + 498.56068

Current market price = 70 * 9.11708 + 498.56068

Current market price = $1,136.76

jeff jeffy answered 2 years ago

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