TravelEasy Inc. has issued 30-year semiannual coupon bonds with a face value of $1,000. If the annual coupon rate is 14% and the current yield to maturity is 8%, what is the firm's current price per bond?

Coupon (R) = 14% x $1,000 = $140

Bond yield (kd) = 8% = 0.08

No of years (n) = 30 years

No of compounding periods (m) = 2

Po = R/m (1 - (1+Kd/m) - nm/Kd/m + FV / (1+Kd/m) nm

Po = $140/2 (1 - (1+0.08/2) - 30x2 + 1,000 (1+0.08/2) 30x2

0.08/2

Po = $70 (1 - (1+0.04) - 60 + 1,000 / (1 + 0.04) 60

0.04

Po = $70 (1 - (1.04) - 60 + 1,000 / (1.04) 60

0.04

Po = 70 (22.6235) + 95.06

Po = $1,678.71

Explanation:

The price of a bond is equal to the present value of coupon plus the present value of the face value.