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FIN515_Homework3
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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?
VB = INT*r*[1 -(1+rd)-n]/i + M*(1+rd)-n
INT = par value
M= maturity value
r = coupon rate per coupon payment period
rd= effective interest rate per coupon payment period
n = number of coupon payments remaining
INT = 1000. And, since we are not given the maturity value, we can assume that it is the same as the par value. Therefore, M = 1000.
r = .08
i = .09
n = 12
Market price of the bonds=1000*.08 * (1 - 1.09-12)/.09 + 1000*1.09-12
Market price of the bonds = $928.39
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- Submitted On 16 May, 2017 05:27:37
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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 y...
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FIN515_Homework3
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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 y...
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