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

Question

3 years ago

8

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

Business

1 answer:

alex41 [277] · Answer 1 · 2021-12-01T00:37:29+03:00

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