Bill Mitselfik has purchased a bond that was issued by Acme Chemical. This bond has a face value of $1 comma 000 and pays a div
idend of 4% per year, compounded semi-annually. Bill bought the bond five years ago at face value and there are six years remaining until the bond matures. Bill wishes to sell it now for a price that will result in Bill earning an annual yield of 6% compounded semi-annually. What price does Bill need to sell the bond for to earn his desired return?
1 answer:
Answer:
The correct answer is $1,114.64
Explanation:
According to the scenario, the given data are as follows:
Rate (Semiannual) = 6% ÷ 2 = 3%
Time period = 5 years
Time period (semi annual) (Nper) = 5 × 2 = 10
Face value (PV) = $1,000
payment (pmt) = $1,000 × 4%/2 = $20
We can calculate the FV by using financial calculator,
The attachment is attached below.
So, the Price = $1,114.64
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