Ten years ago Bacon Signs Inc. issued twenty-five-year 8% annual coupon bonds with a $1,000 face value each. Since then, interest rates in general have fallen and the yield to maturity on the Bacon bonds is now 7%
Given this information, what is the price today for a Bacon Signs bond?
A) $1,000
B) $1,116.54
C) $1,091.08
D) $914.41
Answer: C
Explanation: C)
Bond Price = PMT × +
= $80 × + = $1,091.08.
MODE = END
INPUT 15 7 0 -80 -1,000
KEY N I/Y PV PMT FV
CPT 1,091.08
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