Harrison Co. issued 13-year bonds one year ago at a coupon rate of 8 percent. The bonds make semiannual payments. If the YTM on
these bonds is 5.7 percent, what is the current dollar price assuming a $1,000 par value? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current bond price
1 answer:
Answer:
$1,197.94
Explanation:
For determining the current dollar price we have to applied the present value formula which is to be shown in the attachment below:
Given that,
Future value = $1,000
Rate of interest = 5.7% ÷ 2 = 2.85%
NPER = (13 years - 1 years) × 2 = 24 years
PMT = $1,000 × 8% ÷2 = $40
The formula is shown below:
= -PV(Rate;NPER;PMT;FV;type)
After applying the above formula, the current dollar price of the bond is $1,197.94
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