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