With celebrity bonds, celebrities raise money by issuing bonds to investors. The

Question

With celebrity bonds, celebrities raise money by issuing bonds to investors. The royaties from teh sales of music are used to pay interest and pricipal on the bonds. In April of 2009, EMI announced that it intended to securitize its back catalogue with the help of the Bank of Scotland. The bond was issued with a coupon rate of 6.5% and will mature on this day 36 years from now. The yield on the bond issue is currently 6.1%. At what price should this bond trade today, assuming a face value of $1,000 and annual coupons? The price of the bond today should be

Explanation / Answer

Price=PV(0.061,36,-65,-1000)=1057.79

Bond price= C/r *(1- 1/(1+r)^n) + FV/(1+r)^n

C=Coupon=Coupon rate *FV

r=Yield

FV=Face Value

n= maturity period

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.