One year ago, Auto Land issued 10-year bonds at par. The bonds have a coupon rate of 6.5 percent and pay interest annually. Today, the market rate of interest on these bonds is 6.25 percent. How does today's price of this bond compare to the issue price

N=9

my bad i hit wrong key

N=9
I/Y=6.25%
Fv=1000
PMT=.065*1000
CPT=PV Ignore the sign

To compare the today's price of the bond to the issue price, we need to calculate the current price of the bond using the market rate of interest. We can use the present value (PV) of the future cash flows from the bond to determine its price.

The cash flows from the bond include the annual coupon payments and the principal repayment at the end of the 10-year period. The coupon payment is calculated by multiplying the coupon rate by the par value of the bond. Since the bond was issued at par, the coupon payment remains the same over the 10-year period.

To find the present value of the cash flows, we discount each cash flow using the market rate of interest, which reflects the required rate of return for investors in the market. In this case, the market rate of interest is 6.25 percent.

Here are the steps to calculate the bond price:

1. Calculate the annual coupon payment:
Annual Coupon Payment = Coupon Rate * Par Value

2. Determine the present value (PV) of each cash flow:
PV of Coupon Payment = Annual Coupon Payment / (1 + Market Rate of Interest)^n
where n represents the year of the cash flow (from 1 to 10).

3. Calculate the PV of the Principal Repayment:
PV of Principal Repayment = Par Value / (1 + Market Rate of Interest)^n,
where n is the final year of the bond (10).

4. Sum up the present values of all the cash flows to find the bond price:
Bond Price = Sum of PV of Coupon Payments + PV of Principal Repayment

Once you have all the PVs, sum them up to find the price of the bond as of today.

If the bond price, calculated using the market rate of interest, is higher than the issue price (par value), then the bond is selling at a premium. On the other hand, if the bond price is lower than the issue price, the bond is selling at a discount. Finally, if the bond price is equal to the issue price, the bond is selling at par.