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Equity cost of capital: Trading price of bond

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The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in 15 years. The bond certificate indicates that the stated coupon rate for this bond is 8% and that the coupon payments are to be made semi-annually.

Assuming the appropriate YTM on the Sisyphean bond is 7.5%, then at what price should this bond trade for? What will the bond trade at?

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Solution Summary

Provides steps necessary to calculate the bond price amount.

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The price of the bond would be the present value of interest and principal discounted at YTM. The semi annual interest is 1,000 X 8%/2 = $40, principal ...

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