Question

The Sisyphean Company has a bond outstanding with a face value of $ 1 comma 000 that reaches maturity in 10 years. The bond certificate indicates that the stated coupon rate for this bond is 9.2​% and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the Sisyphean bond is 7.2​%, then the price that this bond trades for will be closest​ to:

Answer 1

Answer:

$1,140.85

Explanation:

We use the Present value formula that is shown on the attachment below:

Data provided in the question

Future value = $1,000

Rate of interest = 7.20%  ÷ 2 = 3.60%

NPER = 10 years  × 2 = 20 years

PMT = $1,000 × 9.2% ÷ 2 = $46

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

So, after solving this, the price of the bond is $1,140.85

In semi annually, the coupon rate and the interest rate would be half whereas the time period is doubles