On January 1, 2005, Systil Corporation issues $50M 10 year bonds with a coupon rate of 10%. Interest is payable annually at the end of the year. If the required return on bonds of similar risk at January 1, 2006 is 8%, what will be the price of the bonds be at this date?
A) $56.71M
B) $56.25M
C) $44.24M
D) $43.86M

Question

Quizplus · Accepted Answer

The bond price is calculated using the present value of future cash flows, which include the annual coupon payments and the face value at maturity, discounted at the new required return rate of 8%.

On January 1, 2005, Systil Corporation Issues $50M 10 Year