Finance questions....

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Yvat

Business Finance

Description

Grossnickle Corporation issued 20-year, noncallable, 7.8% annual coupon bonds at their par value of $1,000 one year ago.  Today, the market interest rate on these bonds is 5.5%.  What is the current price of the bonds, given that they now have 19 years to maturity?

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Explanation & Answer

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Bond valuation: 
Par value = Maturity value = FV = $1,000 
Coupon rate = 7.8% 
Years to maturity = N = 19 
Required rate = I/YR = 5.5% 
(Coupon rate)(Par value) = PMT = $75 
PV = $1,232.15

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Anonymous
Just what I was looking for! Super helpful.

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