tate624 tate624

24-10-2022
Business

Answered

Vulcan, inc. , has 7 percent coupon bonds on the market that have 13 years left to maturity. The bonds make annual payments and have a par value of $1,000. If the ytm on these bonds is 8. 4 percent, what is the current bond price?.

Answer :

tutorconsortium112 tutorconsortium112

06-11-2022

The cost of the bond right now is $891.74.

A zero-coupon bond is one in which the face value is paid back when the bond matures. Bonds with coupon values have annual interest payments.

Do safe coupon bonds exist?

However, zero coupon bonds are not without risk. Zero coupon bonds are exposed to interest rate risk if you sell them before they mature, just like almost all other bonds are. If interest rates increase, your zero coupon bond's secondary market value is likely to decrease.

One explanation for the bond price is:

Given,

Discount rate is 7%.

Number of years till maturity (Nper) = 13

Par value is equal to $1,000 YTM, or 8.4%.

Annual coupon received (PMT):

PV of the coupon is calculated as follows: CP = $891.74

The bond's current value will be $891.74 as a result.

Bonds' recurring interest payments are represented by coupon rates, which are determined by market interest rates. The yield of a bond is the rate of return it produces. The annual interest rate that a bond pays is known as the coupon rate.

To learn more about Zero coupen bonds refer to:

https://brainly.com/question/13120202

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