Grossnickle Corporation issued 20-year, noncallable, 7.5% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 19 years to maturity?
a. $1,142.03
b. $1,201.35
c. $1,113.48
d. $1,232.15
e. $1,171.32

Explanation:

Face value (FV)=$ 1,000.00

Annual Coupon rate=7.50%

Interest per period (PMT) = $75.00 [1000*7.50%]

Number of years to maturity =19

Required rate of return per period = 5.50%

Bond pays $75 from year1 to year 18 and $1000 at maturity(year 19). So to calculate bond price we need to discount cash flows:

Bond price = 75/(1+0.055) + 75/(1+0.055)^2 + 75/(1+0.055)^3 + 75/(1+0.055)^4 + 75/(1+0.055)^5 + 75/(1+0.055)^6 + 75/(1+0.055)^7 + 75/(1+0.055)^8 + 75/(1+0.055)^9 + 75/(1+0.055)^10 + 75/(1+0.055)^11 + 75/(1+0.055)^12 + 75/(1+0.055)^13 + 75/(1+0.055)^14 + 75/(1+0.055)^15 + 75/(1+0.055)^16 + 75/(1+0.055)^17 + 75/(1+0.055)^18 + 75/(1+0.055)^19 + 1000/(1+0.055)^19 =

=

c

explanation:

hi,

henry is an economist and wants to understand the relationship between inflation and consumer spending habits. for his research, he needs the consumer price index for 2014 and the inflation rate. based on the prices of goods given, what will he find to be the cpi and inflation rate for 2014? assume that a consumer’s basket for three consecutive years consists of the following:

you dont privide answer choices.

answer - 15% of a inflatation rate is 15% less in cpi