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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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

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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