D. J. Masson Inc. recently issued noncallable bonds that mature in 10 years. They have a par value of $1,000 and an annual coupon of 5.5%. If the current market interest rate is 7.0%, at what price should the bonds sell?a. $829.21b. $850.47c. $872.28d. $894.65e. $917.01

Bond Price= $894.65

Explanation:

Giving the following information:

Face value= $1,000

Number of periods= 10

Cupon= 0.055*1,000= $55

YTM= 0.07

To calculate the price of the bond, we need to use the following formula:

Bond Price= cupon*{[1 - (1+i)^-n] / i} + [face value/(1+i)^n]

Bond Price= 55*{[1 - (1.07^-10)] / 0.07 + [1,000/(1.07^10)

Bond Price= 386.30 + 508.35

Bond Price= $894.65

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