Question 22 2 points D Big House Nursery Inc has issued 20ye

Question 22 (2 points) D Big House Nursery Inc. has issued 20-year $1,000 face value, 8% annual coupon bonds, with a yield to maturity of 10%. The current price of the bond is $1,000.00 $1,196.36 $829.73 There is not enough information to answer this question.

Solution

Answer to Question 22:

Par Value = $1,000
Annual YTM = 10%
Time to Maturity = 20 years

Annual Coupon Rate = 8%
Annual Coupon = 8% * $1,000
Annual Coupon = $80

Current Price of Bond = $80 * PVIFA(10%, 20) + $1,000 * PVIF(10%, 20)
Current Price of Bond = $80 * (1 - (1/1.10)^20) / 0.10 + $1,000 / 1.10^20
Current Price of Bond = $829.73