Union Local School District has bonds outstanding with a coupon rate of 4.3 percent paid semiannually and 18 years to maturity.
The yield to maturity on these bonds is 3.4 percent and the bonds have a par value of $10,000. What is the dollar price of each bond?
1 answer:
Answer:
$11,204.25
Explanation:
For computing the dollar price of each bond we need to applied the present value formula which is to be shown in the attachment below:
Provided that
Future value = $10,000
Rate of interest = 3.4% ÷ 2 = 1.7%
NPER = 18 years × 2 = 36 years
PMT = $10,000 × 4.3% ÷ 2 = $215
The formula is shown below:
= -PV(Rate;NPER;PMT;FV;type)
After applying the above formula, the dollar price of the bond is $11,204.25
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