TravelEasy Inc.has issued 30-year semiannual coupon bonds with a face value of $1,000.If the annual coupon rate is 14% and the current yield to maturity is 8%,what is the firm's current price per bond?

Question

Quizplus · Accepted Answer

The bond's price is calculated using the present value of its future cash flows, which include semiannual coupon payments and the face value at maturity. With a 14% annual coupon rate, the semiannual coupon is $70. The yield to maturity is 8% annually, or 4% semiannually. Using these values in the bond pricing formula results in a price of approximately $1,678.70.