Nunavut Ocean Cruises sold an issue of 14-year, $1,000 par bonds to build new ships, 4...

Nunavut Ocean Cruises sold an issue of 14-year, $1,000 par bonds to build new ships, 4 years ago. The bonds pay a 6.5% annual coupon. The current required rate of return is 8%. For how much should these bonds sell today? (Round your answer to the nearest whole number.)

Solutions

Expert Solution

Bond sell for = $899

As calculated below

Computation Of Bond Price

a	Annual Interest Amount	$ 65.00
	($1000*6.5%)
b	PV Annuity Factor for (10 Years,8%)	6.710081
c	Present Value Of Annual Interest (a*b)	$ 436.16
d	Redemption Value	$ 1,000.00
e	PV Factor Of (10 Years,8%)	0.46319
g	Present Value Of Redemption Amount (d*e)	$ 463.19
f	Intrinsic Value ( Price ) Of The Bond (c+g)	$ 899

jeff jeffy answered 1 year ago

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