# Price of bond

A General Motors bond carries a coupon rate of 8 percent, has 9 years until maturity, and sells at a yield to maturity of 7 percent. At what price does the bond sell? (Assume annual interest payments.) What will happen to the bond price if the yield to maturity falls to 6 percent?

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#### Solution Preview

Bond Pricing. A General Motors bond carries a coupon rate of 8 percent, has 9 years until maturity, and sells at a yield to maturity of 7 percent.

At what price does the bond sell? (Assume annual interest payments.)

To calculate the price of the bond we need to calculate / read from tables the values of

PVIF= Present Value Interest Factor

PVIFA= Present Value Interest Factor for an Annuity

Price of bond= PVIF * Redemption value + PVIFA * interest payment per period

PVIFA( n, r%)= =[1-1/(1+r%)^n]/r%

PVIF( n, r%)= =1/(1+r%)^n

Price of bond

Coupon rate= 8.000%

Face ...

#### Solution Summary

Calculates bond price for different yields to maturity.