Regatta Inc has six-year bonds outstanding that pay a 8.25 percent coupon rate. Investors

QUESTION

Regatta, Inc, has six-year bonds outstanding that pay a 8.25 percent coupon rate. Investors buying the bond today can expect to earn a yield to maturity of 6.875 percent. What should the companys bonds be priced at today? Assume annual coupon payments.
Price of the bonds today = $1,065.79 Price of the bonds today = PV of interest payments + PV of redemption value Annual interest payments = $1,000 x 8.25% = $82.50 Redemption value = $1,000 Number of periods = 6 years = [Annual

st payments x PVAF(6.875%, 6 periods)] + [Redemption value x PVF(6.875%, 6 periods)] = ($82.50 x 4.7850) + ($1,000 x 0.6710) = $394.76 + $671.03 = $1,065.79

ANSWER:

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