Callaghan Motors' bonds have 10 years remaining to maturity.  Interest is paid annually; they have a $1,000 par value; the coupon interest rate is 8 percent; and the yield to maturity is 9 percent.  What is the bond's current market price?

Answer:

Face Value (or) Par Value of the Bond   =   $1,000

Coupon Interestrate                                =    8%

Yield to Maturity(YTM)                         =    9%

Number of years toMaturity                   =    10 years

Current Market Price of the Bond           =    ?

Market Price of the Bond = Coupon Payment *[PVIFA_{9%, 10}]   + $1,000[PVIF_{9%, 10}]

Market Price of theBond = $80 * 6.4177   + $1,000* 0.4224

Market Price of the Bond = $513.416  + $422.40

Current Market Price of the Bond =  $935.82