Marconi Corporation issued 30 year semi-annual 14% coupon bonds. If the current yield to maturity is 8%, what is the firm's current price?

Question

Quizplus · Accepted Answer

The bond's price is calculated using the present value of its future cash flows, which include semi-annual coupon payments and the face value at maturity. Given a 14% annual coupon rate, the semi-annual coupon is 7% of the face value. With a yield to maturity of 8% annually (or 4% semi-annually), the bond's price is closest to $1,678.70.

Marconi Corporation Issued 30 Year Semi-Annual 14% Coupon Bonds