The Sisyphean Company has a bond outstanding with a face value of $ 1 comma 000 that reaches maturity in 10 years. The bond cert
ificate 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:
1 answer:
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
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