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Reika [66]
2 years ago
14

The Sisyphean Company has a bond outstanding with a face value of $ 5 comma 000 $5,000 that reaches maturity in 5 5 years. The b

ond certificate indicates that the stated coupon rate for this bond is 9.1 9.1​% and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the Sisyphean bond is 8 8​%, then the price that this bond trades for will be closest​ to:
Business
1 answer:
lilavasa [31]2 years ago
8 0

Answer: $5,219.59905

the price that the bond traded for would be closest to

$5,220 (rounded to whole number)

Explanation:

Using the price of bond formula below:

Price = C × 1 - [(1+r)^-n] /r + F/ (1+r)^n

C = coupon rate = 9.1% of face values ($5,000)

F= Face value(par value) = $5,000

n = number of years to maturity; 5

r = YTM (yield to maturity) = 8% = 0.08

Price = 455 × 1 - [(1+0.08)^-5]/0.08 + 5,000/(1+0.08)^5

Price = 455 × 1 - [(1.08)^-5]/0.08 + 5,000/(1.08)^5

Price= 455 × ( 1 - 0.680583197)/0.08 + 5,000 / 1.46932808

Price= 455 × (0.319416803)/0.08 + 3,402.91598

Price = 1,816.68307 + 3,402.91598

Price= $5,219.59905

≈$5,220 to the nearest whole number.

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