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Vulcan, Inc., has 8.5 percent coupon bonds on the market that have 8 years left to maturity. The bonds make annual payments and have a par value of $1,000. If the YTM on these bonds is 10.5 percent, what is the current bond price

Respuesta :

Answer:

$895.22

Explanation:

We use the present value formula to determine the current bond price i.e shown in the attachment below:

Given that,  

Future value = $1,000

Rate of interest = 10.5%  

NPER = 8 years

PMT = $1,000 × 8.5% = $85

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

So, after solving this, the current bond price is $895.22

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