One year ago Jackson and Dander Co issued 15year noncallable

One year ago Jackson and Dander Co. issued 15-year, noncallable, 5.9% annual coupon bonds at their par value of $1,000. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 14 years to maturity?

Solution

N=14

Coupon= 5.9%*1000 = $59

FV= $1000

Rate= 5.5%

Price= C*(1-1/(1+r)^n)/r + FV/(1+r)^n

= 59*(1-1/1.055^14)/0.055 + 1000/1.055^14

=$1038.36