Kamen Inc.'s bonds mature in 7 years, have a par value of $1,000, and an annual coupon rate of 8%....

Question

Kamen Inc.'s bonds mature in 7 years, have a par value of $1,000, and an  annual coupon rate of 8%. The market interest rate for the bonds is  8.5%. What is the bond's price?

Robert · Accepted Answer

Par value of bond = $ 1,000 
Coupon rate = 8% pa 
Hence, annual coupon payment = (8/100)*1000 = $ 80 
Maturity period = 7 years 
Applicable market interest rate = 8.5% pa 
The current market value of the bond can be estimated as follows.

Kamen Inc.'s bonds mature in 7 years, have a par value of $1,000, and an annual coupon rate of 8%. The market interest rate for the bonds is 8.5%. What is the bond's price?

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