UOP, a petroleum processing technology firm, issued a 10% coupon, 20 year to maturity first mortgage bond five years ago.If the current market rate of debt for UOP is 8%, at what price should this bond sell, to the nearest dollar? Assume a par value of $1,000, and pays interest semi-annually.
A)$1,170.
B)$999
C)$1,095
D)$1,173

Question

Quizplus · Accepted Answer

Pₒ = 50(17.292) + 1000(.308) = $1,172.60
Solution using a financial calculator:
N = 15 × 2
I = 8/2
PMT = 100/2
FV = 1000
Solve for PV = 1172.92

UOP, a Petroleum Processing Technology Firm, Issued a 10% Coupon