Wachowicz Corporation issued 15-year, noncallable, 7.5% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 14 years to maturity?

Question

Wachowicz Corporation issued 15-year, noncallable, 7.5% annual coupon bonds at their par value of $1,000 one year ago.  Today, the market interest rate on these bonds is 5.5%.  What is the current price of the bonds, given that they now have 14 years to maturity?

mipi · Answer

Bond Yield Example Data
A B

1 FV 1000
2 Annual Coupon Rate 7.5%
3 Annual Return 5.5%
4 Years to Maturity 14
5 Years 1
6 Payment Frequency 1
7 Value of Bond 1191.79

PUT THIS IN EXCEL AND YOU HAVE A CALCULATOR

VALUE OF BOND=
=-PV(B4/B7,B5*B7,B3/B7*B2,B2)

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