Cost of debt using bonds

CFA Level I Corporate Finance
#1

In order to find the rate on debt, I am given the following information:

"Outstanding 20-year annual pay 6% coupon bonds selling for $894."

I realize that we need to plug this into the calculator, but I need to know the future value and the payment, neither of which is given. The answer says that you plug in: [FV] = 1000

[PMT] = 60

But gives no explanation as to why you do so. Do you just assume that the future value is a number close to the PV rounded to the nearest hundred?

#2

The default par value for corporate bonds is $1,000 per bond, unless otherwise specified. If you’re given a quote (without a dollar sign), it’s as a percentage of par.

#3

Got it. Thank you.

#4

You’re welcome.