In: Finance
Bastion Corporation issued $100 million bonds that mature in 30 years and have a 5% coupon rate that is paid annually. If the bonds were sold to yield 5.4%, determine the price of the bonds at the end of year 15.
Multiple Choice
$94,581,667
$95,500,206
$95,958,151
$97,606,824
$98,287,192
The price of the bonds can be calculated as follows:
Price = Coupon * ((1-(1+R)^-N)/R + FV/(1+R)^N
where Coupon = 100 million * 5% = 5000000
N = 30 - 15 = 15 years
R = 5.40%
Price = 5000000*((1-(1+5.4%)^-15)/5.4% + 100000000/(1+5.4%)^15
= 50523118.66 + 45435031.85
= 95958150.51
Or 95958151
Correct choice C