Caldwell,Inc.sold an issue of 30-year,$1,000 face value bonds to the public.The bonds carry a 10.85% coupon rate and pay interest semiannually.It is now 12 years later.The current market rate of interest on the Caldwell bonds is 8.45%.What is the current market price (intrinsic value)of the bonds? Round off to the nearest $1.

Question

Quizplus · Accepted Answer

The current market price of the bond is calculated using the present value of future cash flows, which include the semiannual coupon payments and the face value at maturity, discounted at the current market interest rate. Given the coupon rate, market rate, and time remaining, the intrinsic value is approximately $1,220.