Simpson Industries Inc. bonds currently have 12 years remaining to mat

Simpson Industries Inc. bonds currently have 12 years remaining to maturity. What is the current price of the firm’s semi-annual bonds if they carry a face value of $1,000, an annual coupon rate of 8% and an annual yield to maturity of 7%?

A) $924.64
B) $1,000.00
C) $1,079.43
D) $1,080.29

ANSWER

D
Explanation: D) Via Calculator: N = 12*2, I = 7/2, PMT = 40, FV = 1,000 Solve for PV = $1,080.29.