Nick Turner is considering the purchase of a bond that was issued 4 years ago and has 15 years left till maturity. The bond has a coupon rate of 6.25 percent and a face value of $1,000. If the yield to maturity is 6.50%, calculate to the nearest penny the value of the bond today.

Nick Turner is considering the purchase of a bond that was issued 4 years ago and has 15 years left till maturity. The bond has a coupon rate of 6.25 percent and a face value of $1,000. If the yield to maturity is 6.50%, calculate to the nearest penny the value of the bond today.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 4P

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Concept explainers

Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.

Question

Nick Turner is considering the purchase of a bond that was issued 4 years ago and has 15 years left
till maturity. The bond has a coupon rate of 6.25 percent and a face value of $1,000. If the yield to
maturity is 6.50%, calculate to the nearest penny the value of the bond today.

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