Bond price: Briar Corp is issuing a 10-year bond with a coupon rate of 7 percent. The interest rate for similar bonds is currently 9 percent. Assuming annual payments, what is the present value of the bond? (Round to the nearest dollar.)

Question

Quizplus · Accepted Answer

The bond's present value is calculated using the formula for the present value of an annuity for the coupon payments and the present value of a lump sum for the face value. With a coupon rate of 7% and a market rate of 9%, the bond's present value is less than its face value, resulting in a price of approximately $872.

Bond Price: Briar Corp Is Issuing a 10-Year Bond with a Coupon