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Anna71 [15]
3 years ago
13

Rogoff Co.'s 15-year bonds have an annual coupon rate of 9.5%. Each bond has face value of $1,000 and makes semiannual interest

payments. If you require an 11.0% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?
Business
1 answer:
meriva3 years ago
6 0

Answer:

maximum sum of $891.00

Explanation:

given data    

Face Value = $1,000

Annual Coupon Rate = 9.50%

Time to Maturity = 15 years

yield to maturity = 11%

to find out

maximum price you should be willing to pay for the bond

solution

we know that Semiannual Coupon Rate will be  = 4.75%  

so semiannual Coupon will be = Semiannual Coupon Rate ×  Face Value

semiannual Coupon = 4.75% × $1,000

Semiannual Coupon = $47.50

and Semiannual Period will be for 15 year  = 30

and Semiannual yield to maturity will be here YTM = 5.50%

so

Current Price  will be here

Current Price = Semiannual Coupon × \frac{1-(\frac{1}{1+r})^t}{r} + \frac{faevalue}{(1+r)^t}     ...................1

put here value

Current Price = $47.50 × \frac{1-(\frac{1}{1.055})^{30}}{0.055} + \frac{}{1.055^{30}}

Current Price = $891.00

so pay a maximum sum of $891.00

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When workers are asked to participate in a research study, vulnerabilities related to the subject's employment may include:When
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The complete question is -

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