Madsen Motors's bonds have 11 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 10%, and the yield to maturity is 13%. What is the bond's current market price? Round your answer to the nearest cent.
Madsen Motors's bonds have 11 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 10%, and the yield to maturity is 13%. What is the bond's current market price? Round your answer to the nearest cent.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 10P
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Problem Walk-Through
Madsen Motors's bonds have 11 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 10%, and the yield to
maturity is 13%. What is the bond's current market price? Round your answer to the nearest cent.
2$](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F28e2909e-59ae-4572-aed3-07960c54a16c%2Fef6ea130-1b78-4b3c-87a3-6a74d9b8d309%2Flfj907w_processed.jpeg&w=3840&q=75)
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Problem Walk-Through
Madsen Motors's bonds have 11 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 10%, and the yield to
maturity is 13%. What is the bond's current market price? Round your answer to the nearest cent.
2$
Expert Solution
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Step 1
Face Value = 1,000
Time to maturity = 11 years
Coupon = Coupon Rate * Face Value = 10%*1000 = $100
YTM = 13%
Bonds current market price would be present value of annual interest payments and maturity value of bond.
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