Answer:
= $865.79
Explanation:
The value of the bond is the present value (PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV).
Value of Bond = PV of interest + PV of RV
The value of bond of Morin Company can be worked out as follows:
Step 1
PV of interest payment
PV = A × (1-(1+r)^(-n))/r
r- 8%, n- 10, A- interest payment = 60
PV of interest
= 60× (1- (1+0.08)^(-10)/0.08
= 402.60
Step 2
PV of Redemption Value
PV = RV × (1+r)^(-n)
= 1,000 × (1.08)^(-10)
= $463.193
Step 3
Price of bond
= $536.80 + 463.19
= $865.79
