Bond price: Triumph Company issued five-year bonds that pay a coupon of 6.375 annually. The current market rate for similar bonds is 8.5 percent. How much will you be willing to pay for Triumph's bond today? Round to the nearest dollar.

Question

Quizplus · Accepted Answer

To calculate the price of the bond, we need to use the present value formula. P = C/(1+r)^n + C/(1+r)^(n-1) + ... + C/(1+r) + F/(1+r)^n, where P is the price of the bond, C is the annual coupon payment, r is the market rate, n is the number of years until maturity, and F is the face value of the bond. 
Plugging in the values, we get P = 6.375/(1+0.085)^1 + 6.375/(1+0.085)^2 + 6.375/(1+0.085)^3 + 6.375/(1+0.085)^4 + 6.375/(1+0.085)^5 + 100/(1+0.085)^5 = $916. Therefore, the answer is C.

Bond Price: Triumph Company Issued Five-Year Bonds That Pay a Coupon