Company A wants to issue 60 bonds. Each bond has a 7% coupon bond with semi-annual payments, a par value of $1000, 30 years to m

Question

seropon [69]

1 year ago

11

Company A wants to issue 60 bonds. Each bond has a 7% coupon bond with semi-annual payments, a par value of $1000, 30 years to m

aturity, and a yield to maturity of 6.7%. How much will Company A receive when it sells the bonds

Business

1 answer:

FromTheMoon [43] · Answer 1 · 2023-02-17T02:47:55+03:00

Company A receive when it sells the bonds $62, 314.54

What is yield to maturity?

The annualized return that a bond investor would get from keeping the bond until maturity is referred to as the “yield to maturity” (YTM) of a bond.

Face value $1000, Coupon rate 7%, 30 years to maturity, yield to maturity of 6.7%, frequency 2

Nper = 30×2 = 60 (indicates the remaining maturity period of bonds), Rate = 0.067/2 (indicates semi-annual YTM), PMT = 1000 7%1/2 = 35 (indicates the amount of semi-annual interest payment), FV = 1000 (indicates the face value of bonds), PV = ? (indicates the current price of the bond), Current Price of the Bond = PV(Rate, Nper, PMT, FV) = PV(0.067/2,60,35, 1000) = $1038.58

=$62, 314.54

Hence, $62, 314.54 is the correct answer.

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