Question
In: Finance
Midland oil has$1000par value(maturity value)bonds outstanding at 13 percent interest..The bond will mature in 20 years...
Midland oil has$1000par value(maturity value)bonds outstanding at 13 percent interest..The bond will mature in 20 years with annual payments.
Compute the current price of the bond if the present yield to maturity is.(Round the final answers 2 decimal places.
a. 14 Percent $
b. 12 percent $
c. 13percent $
Solutions
Expert Solution
Face/Par Value of bond = $1000
Annual Coupon Bond = $1000*13%
= $130
No of years to maturity(n) = 20 years
- Computing the current price of the bond if the present yield to maturity is
a), YTM = 14%
Calculating the Market price of Bond:-
Price = $861.001 + $72.761
Price = $933.77
B), YTM = 12%
Calculating the Market price of Bond:-
Price = $971.028 + $103.667
Price = $1074.69
C), YTM = 13%
Calculating the Market price of Bond:-
Price = $913.218 + $86.782
Price = $1000
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