# Financial Management: P16-8 Twenty-five-year B-rated bonds of Parker Optical Company

Financial Management
Problem 16-8 Interest rates and bond ratings
Twenty-five-year B-rated bonds of Parker Optical Company were initially issued at a 12 percent yield. After 10 years the bonds have been upgraded to Aa2. Such bonds are currently yielding 10 percent to maturity.

Required:
Determine the price of the bonds with 15 years remaining to maturity. Assume the par value of the bond is \$1,000. (Round "PV Factor" to 3 decimal places. Round your answer to 2 decimal places. Omit the "\$" sign in your response.)

Given - Table 16-3
Interest Rates and Bond Prices (the bond pay 12%)
Rates in the Market (%) - Yield to Maturity*
Years to Maturity 8% 10% 12% 14% 16%
1.................... \$1,038.16 \$1,018.54 \$1,000 \$981.48 \$963.98
15.................. \$1,345.52 \$1,153.32 \$1,000 \$875.54 \$774.48
25.................. \$1,429.92 \$1,182.36 \$1,000 \$862.06 \$754.98
*The prices in the table are based on semi-annual interest, but you enter the table with annual values