Answer:
The current dollar price assuming a par value of $1,000 is $ 1,213.95
Explanation:
The current price is computed as shown below:
The coupon payments will be as follows:
= (7.3% ÷ 2) × $ 1,000 (Since the payments are semi annual, hence divided by 2)
= $ 36.5
YTM will be as follows:
= (5.3% ÷ 2) (Since the payments are semi annual, hence divided by 2)
= 2.65%
N is computed as follows:
= (17 - 1 ) × 2 (Since the payments are semi annual, hence multiplied by 2)
= 32
So, the price of the bond will be as follows:
= Coupon payment x [
] + ![Par value / (1 + r)^n](https://tex.z-dn.net/?f=Par%20value%20%2F%20%281%20%2B%20r%29%5En)
= $ 36.5 × [ ( 1 -
] / 0.0265 ] + ![\frac{1000}{1.0265^{32}}](https://tex.z-dn.net/?f=%5Cfrac%7B1000%7D%7B1.0265%5E%7B32%7D%7D)
= $ 36.5 × 21.39526 + $ 433.0255
= $ 780.92699 + $ 433.0255
= $ 1,213.95