Bastion Corporation issued $100 million bonds that mature in 30 years and have a 5% coupon...

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

Solutions

Expert Solution

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

jeff jeffy answered 1 year ago

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