Janes pizzeria issued 10-year bonds one year ago at a coupon rate of 8.75 percent. If...

Janes pizzeria issued 10-year bonds one year ago at a coupon rate of 8.75 percent. If the YTM on these bonds is 7.25 percent, what is the current bond price?

Solutions

Expert Solution

Price of bond = Coupon * PVIFA (n,i)+ face value * PVIF (n,i)

Price of bond= ($1000*8.75%)* PVIFA (9, 7.25%) + 1000* PVIF (9,7.25%)

Price of bond = 87.50 *6.446505288041140 + 1000 * 0.5326283666170170

= $ 1,096.70

Hence the correct answer is $ 1,096.70

jeff jeffy answered 2 years ago

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