In: Finance
1. Jackson Corporation's bonds have 9 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 9%. The bonds have a yield to maturity of 10%. What is the current market price of these bonds? Do not round intermediate calculations. Round your answer to the nearest cent.
2. Wilson Corporation’s bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $850. What is their yield to maturity? Round your answer to two decimal places.
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1. The current market price of these bonds is $ 942
Working:
Parameters provided in the question:
Using a Financial Calculator to calculate the price of the bond
Substituting values in the financial calculator,
Computing PV which is nothing but the market price of the bond,
PV= Market price of the bond = $ 942
Therefore, the current market price of these bonds is $ 942
2. Yield to maturity is 12.48%
Working:
Parameters provided in the question:
Using a Financial Calculator to calculate the price of the bond
Substituting values in the financial calculator,
Computing I/Y which is nothing but the yield to maturity of the bond,
I/Y= Yield to maturity the bond = 12.48 %
Therefore, the Yield to maturity of these bonds is 12.48 %