How to calculate current Bond Pricing? and Jaguar_XK_Bond.jpg

How to calculate current Bond Pricing?

ABC, Inc, has 7 percent coupon bonds on the market that have 8 years left to maturity. The bonds make annual payments. If the YTM on these bonds is 9 percent, what is the current bond price?


Bond best answer:

Answer by Don G
The bond's current price consists of 2 parts:
1) The PV of the bond's face, or par value, in this case with N of 8, R 9%, and
2) The PV of the Annuity, with N of 8, R %. The annuity = face value x coupon rate.

A $ 1,000 Bond, N 8, R 9% and annuity of $ 70 will be $ 889.

Bond

Jaguar_XK_Bond.jpg


Image by jonlarge
Jaguar XK from the James Bond film Die Another Day, in the paddock on the MPH '06 show at the NEC

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