Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity,a face value of $1,000, and a coupon rate of 7% (annual payments). The yield to maturity on thisbond when it was issued was 6%. What was the price of this bond when it was issued?Complete the steps below using cell references to given data or previous calculations. In somecases, a simple cell reference is all you need. To copy/paste a formula across a row or down acolumn, an absolute cell reference or a mixed cell reference may be preferred. If a specific Excelfunction is to be used, the directions will specify the use of that function. Do not type innumerical data into a cell or function. Instead, make a reference to the cell in which the data isfound. Make your computations only in the blue cells highlighted below. In all cases, unlessotherwise directed, use the earliest appearance of the data in your formulas, usually the GivenData section.Maturity (years)10Face value1,000Coupon rateYield to maturity7%6%CouponBond price In cell D11, by using cell references, calculate the coupon payment of the bondIn cell D12, by using cell references, calculate the price of the bond when it was issued .Note: The output of the expression or function you typed in this cell is expected as apositive number.

The coupon is paid on the face value of the bond. Therefore, the coupon of the bond is calculated…

Answered: Suppose that General Motors Acceptance…

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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Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a face value of $1,000, and a coupon rate of 7% (annual payments). The yield to maturity on this bond when it was issued was 6%. What was the price of this bond when it was issued?