Question

Jane thorpe has been offered a seven-year bond issued by barone, inc., at a price of $943.22. the bond has a coupon rate of 9 percent and pays the coupon semiannually. similar bonds in the market will yield 10 percent today. should she buy the bonds at the offered price? (do not round intermediate computations. round your final answer to the nearest dollar.)

Answer 1

Years to maturity =n= 7
Coupon rate = C = 9%
Frequency of payment =m= 2
Semiannual coupon = $1,000 × (0.09/2) = $45.00
Current market rate =i= 10%
Present value of bond = Pv

The correct answer is: Yes, the bond is worth more at $951