tmc
Oct 22, 2007, 09:05 PM
Let me start with posting the problem
(interest payments are on an annual basis)
Midland Oil has $1,000 par value bonds outstanding at 8 percent interest. The bonds will mature in 25 years. Compute the current price of the bonds if the present yield to maturity is 7%.
I understand that we are supposed to add the present value of interest payments & the present value of Par Value at Maturity.
So . .
PV = FV x PVIF
Therefore . .
1000 x 0.184 =184.00
The problem is not showing me what the interest payments are, or is it? the 8%? AM I supposed to take 1000 * 8% then multiply it by the factor?
(interest payments are on an annual basis)
Midland Oil has $1,000 par value bonds outstanding at 8 percent interest. The bonds will mature in 25 years. Compute the current price of the bonds if the present yield to maturity is 7%.
I understand that we are supposed to add the present value of interest payments & the present value of Par Value at Maturity.
So . .
PV = FV x PVIF
Therefore . .
1000 x 0.184 =184.00
The problem is not showing me what the interest payments are, or is it? the 8%? AM I supposed to take 1000 * 8% then multiply it by the factor?