An investor purchases a 15-year, $1,000 par value bond that pays semiannual interest of $50. If the semiannual market rate of in

Question

3 years ago

7

terest is 6%, what is the current market value of the bond

1 answer:

bearhunter [10] · Answer 1 · 2022-02-02T18:05:40+03:00

Answer:

The answer is $862.35

Explanation:

This is a semiannual paying coupon, meaning interest are paid twice in year.

N(Number of periods) = 30periods ( 15 years x 2)

I/Y(Yield to maturity) = 6 percent

PV(present value or market price) = ?

PMT( coupon payment) = $50

FV( Future value or par value) = $1,000.

We are using a Financial calculator for this.

N= 30; I/Y = 6; PMT = 50; FV= $1,000; CPT PV= -862.35

Therefore, the market price of the bond is $862.35.