(Q1 IN TYPE B) TWO YEARS AGO BONDS WERE ISSUED WITH 10 YEARS UNTIL...

11. (Q1 in Type B) Two years ago bonds were issued with 10 years until maturity, selling at par, and a 7% coupon. Interest is paid semi-annually. If market interest rates for that grade of bond are currently 8.25%, what will be the price of these bonds? A) $700.00 B) $916.00 C) $927.84 D) $987.50 Solution: C Using your calculator: PMT = $35, i= 8.25/2 = 4.125, n = 8 yrs remaining x 2=16, FV=$1000, COMP PV Æ PV = $927.84