Union Local School District has bonds outstanding with a coupon rate of 4.3 percent paid semiannually and 18 years to maturity.

Question

3 years ago

13

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:

9966 [12] · Answer 1 · 2022-05-24T08:46:22+03:00

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