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ABC Inc. bonds have a $1,000 face value. The promised annual coupon is $89. The bonds mature in 8 years. There are 8 coupon payments of $89 each starting a year from now, and the last payment 8 years from now is coupon plus face.
The market’s required return for these bonds is 6%. What is the price of these bonds?
This question will require you to use Excel's PV function (to find the present value of an annuity). You can use the PV formula to find discounted value of coupons. For discounted value of Face Value payment, you have to use the /(1+r)^N.
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