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grossnickle Corporation issued 20-year, noncallable, 7.4% 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 19 years to maturity?

Respuesta :

Answer:

$1,220.55

Explanation:

We use the Present value formula to find out the current price of the bonds. The calculation is presented on the excel spreadsheet

Given that,  

Future value = $1,000

Rate of interest = 5.5%

NPER = 19 years

PMT = $1,000 × 7.4% = $74

The formula is shown below:

= -PV(Rate,NPER,PMT,FV,type)

So, after solving this, the current price of the bond is $1,220.55

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