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Leggio Corporation

Leggio Corporation issued 20-year, 7% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds has dropped to 6%. What is the new price of the bonds, given that they now have 19 years to maturity?

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7. Leggio Corporation issued 20-year, 7% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds has dropped to 6%. What is the new price of the bonds, given that they now have 19 years to maturity?

$1,046.59

$1,111.58

$1,133.40

$1,177.78

$1,189.04

where B is the issued price/current price
C is the coupon payment
r is the current interest rate
n is the period

B = 70 x [1 - 1 ] + 1,000
(1.06)19 (1.06)19
0.06

B = ...

Solution Summary

This solution is comprised of a detailed explanation to answer what is the new price of the bonds, given that they now have 19 years to maturity.

$2.19