Question
In: Finance
Madsen Motors's bonds have 13 years remaining to maturity. Interest is paid annually; they have a...
Madsen Motors's bonds have 13 years remaining to maturity. Interest is paid annually; they have a $1,000 par value; the coupon interest rate is 11%; and the yield to maturity is 9%. What is the bond's current market price? Round your answer to the nearest cent.
Solutions
Expert Solution
Bond price = Coupon*((1-(1+R)^-N)/R + FV/(1+R)^N
Coupon = 1000*11% = 110, R = 9% and N = 13 years
Bond price = 110*((1-(1+9%)^-13)/9% + 1000/(1+9%)^13
= 823.56 + 326.18
= 1149.74
jeff jeffy answered 2 years agoRelated Solutions
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