SOLUTION: Callaghan Motors bonds have 10 years remaining to maturity.Interest is paid annually, they have a 1000 par value, the coupon interest rate is 8%, and the yeild to maturity is 9%. W
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Question 666388: Callaghan Motors bonds have 10 years remaining to maturity.Interest is paid annually, they have a 1000 par value, the coupon interest rate is 8%, and the yeild to maturity is 9%. What is the bond's current market price? Answer by swincher4391(1107) (Show Source):
You can put this solution on YOUR website! PV factor of sum = (1+i)^-n
= (1+9%)^-10
=1.09^-10
= 0.4224
PV factor of annuity = 1 - (1+i)^-n / i
= 1 - (1+9%)^-10 / 9%
= 1 - 0.4224 / 9%
= 0.5775 / 9%
= 6.417
= PV factor of Sum * Par Value + PV factor of annuity * coupon payment
