Bond price: Regatta, Inc., has six-year bonds outstanding that pay a 8.25 percent coupon rate. Investors buying the bond today can expect to earn a yield to maturity of 6.875 percent. What should the company's bonds be priced at today? Assume annual coupon payments. (Round to the nearest dollar.)

Question

Quizplus · Accepted Answer

The bond price is calculated using the present value of future cash flows, which include annual coupon payments and the face value at maturity, discounted at the yield to maturity rate. Given the coupon rate is higher than the yield to maturity, the bond price will be above par value. Calculating the present value of the cash flows results in approximately $1,066.

Bond Price: Regatta, Inc