A bond that matures in six years has a par value of $1,000, an annual coupon payment of $80,
and a market interest rate of 9%. What is its price?
Years to Maturity 6
Annual Payment $80
Par value $1,000
Going rate, rd 9%
Value of bond =
Last year a firm issued 30-year, 8% annual coupon bonds at a par value of $1,000. (1) Suppose
that one year later the going rate drops to 6%. What is the new price of the bonds, assuming
that they now have 29 years to maturity?
Years to Maturity 29
Coupon rate 8%
Annual Payment $80
Par value $1,000
Going rate, rd 6%
Value of bond =