Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. toys co. issued 10-year bonds a year ago at a coup

Toys Co. issued 10-year bonds a year ago at a coupon rate of 10%. The bonds...

Free

80.2K

Verified Solution

Question

Finance

Toys Co. issued 10-year bonds a year ago at a coupon rate of10%. The bonds make semiannual payments and have a par value of$1,000. If the YTM on these bonds is 9%, what is the current bondprice?

Answer & Explanation Solved by verified expert
4.0 Ratings (465 Votes)

Current Bond Price =Present value of future cash flows
Present Value (PV) of Cash Flow:
(Cash Flow)/((1+i)^N)
i=Discount Rate=Semi annual YTM=(9/2)%=4.5%=0.045
N=Semi annual period of cash flow
Semi annual coupon payment $50 (1000*10%)/2
Payment at maturity end of year10 $1,000
N A B=A/(1.045^N)
Semi annual period Cash Flow Present Value
1 $50 $48
2 $50 $46
3 $50 $44
4 $50 $42
5 $50 $40
6 $50 $38
7 $50 $37
8 $50 $35
9 $50 $34
10 $50 $32
11 $50 $31
12 $50 $29
13 $50 $28
14 $50 $27
15 $50 $26
16 $50 $25
17 $50 $24
18 $50 $23
19 $50 $22
(1000+50) 20 $1,050 $435
Total $1,065
Current Bond Price $1,065

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

Toys Co. issued 10-year bonds a year ago at a coupon rate of10%. The bonds make semiannual payments and have a par value of$1,000. If the YTM on these bonds is 9%, what is the current bondprice?

Other questions asked by students

Geometry
1.2K views

Multiple Response Which coordinates can be used to describe the point on the grid to...

Basic Math
1.2K views

Use the Test Scores Data Set.Preview the document The data consists of standardized test scores over...

Advance Math
1.2K views

Prove uniqueness of (a) LU-factorisation, (b) of LDU-factorisation of a square matrix.

Physics
1.2K views

15 The magnetic field at the point O in the following current carrying square loop...

Basic Math
1.2K views

Simplify and write the results in standard form(3 - 2!) (8 + 3i)

Calculus
1.2K views

A certain butterfly population changes at the rate B(t) = 16.2(1.4)? butterflies per week, where...

Algebra
1.2K views

1 Dan has to pay 2 each time he takes the city bus Write an...

Accounting
1.2K views

ABC Corp bought a production machine on January 1, 2012 for $31,250. The company elected...

Accounting
1.2K views

In what ways can electronic evidence be destroyed so that it is no longer admissible...

Accounting
1.2K views

Income Statements under Absorption Costing and Variable Costing Crazy Mountain Sports Inc. assembles and sells...

Finance
1.2K views

If the nominal interest rate is 5.3 percent, and the real interest rate is 1.3...

Finance
1.2K views

EOQ analysis Tiger Corporation purchases 1,440,000 units per year of one component. The fixed cost...