A company issues a ten-year bond at par with a coupon rate of 6.5% paid semi-annually. The YTM at the beginning of the third yea

Question

3 years ago

7

r of the bond (8 years left to maturity) is 8.6%. What is the new price of the bond

1 answer:

Montano1993 [528] · Answer 1 · 2022-05-24T13:35:32+03:00

Answer:

$880.31

Explanation:

For computing the new price of the bond we need to apply the present value formula i.e to be shown in the attachment

Given that,

Assuming Future value = $1,000

Rate of interest = 8.6% ÷ 2 = 4.3%

NPER = 8 years × 2 =

PMT = $1,000 × 6.5% ÷ 2 = $32.5

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

So, after applying the above formula, the present value is $880.31