Author Question: Ten years ago Bacon Signs Inc. issued twenty-five-year 8 annual coupon bonds with a 1,000 face value ... (Read 96 times)

Kthamas · **on:** Jul 10, 2018

Ten years ago Bacon Signs Inc. issued twenty-five-year 8 annual coupon bonds with a 1,000 face value each. Since then, interest rates in general have risen and the yield to maturity on the Bacon bonds is now 9.

Given this information, what is the price today for a Bacon Signs bond?
A) 1,000
B) 919.39
C) 901.77
D) 1.085.59

Question 2

The appropriate rate to use to discount the cash flows of a bond in order to determine the current price is the ________.

A) yield to maturity
B) coupon rate
C) par rate
D) current yield

aloop · **Reply #1 on:** Jul 10, 2018

Answer to Question 1

Answer: B
Explanation: B)
Bond Price = PMT +
= 80 + = 919.39.

MODE = END
INPUT 15 12 0 -80 -1,000,000
KEY N I/Y PV PMT FV
CPT 919.39

Answer to Question 2

Answer: A