(5-1) Jackson 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 8%. The bonds have a yield to maturity of 9%. What is the current market price of these bonds?
(5-1) Jackson 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 8%. The bonds have a yield to maturity of 9%. What is the current market price of these bonds?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Transcribed Image Text:Bond Valuation
(5-1) Jackson 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 8%. The bonds have a yield to
maturity of 9%. What is the current market price of these bonds?
Answer:
n= 12 years, Par Value = $1,000, Coupon Interest Rate = 8%, YTM = 9%
Coupon Payment(I)
Par Value of Bond x Coupon Interest Rate
$1,000 x 8%
$80
Value of bonds (Vb)
= $928.36
By using financial calculator:
Inputs:
N= 12, I/Y = 9%,
The current market of these bonds is $928.36
(manual calculation) or $928.39 (financial
calculator).
PMT = $80, FV = $1,000
Output:
PV = -$928.39
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