Union local school district has a bond outstanding with a coupon rate of 3.3 percent paid semiannually and 20 years to maturity.

Question

4 years ago

12

The yield to maturity on this bond is 3.7 percent, and the bond has a par value of 10000. What is the price of the bonds?

1 answer:

topjm [15] · Answer 1 · 2022-01-17T08:43:00+03:00

Answer:

$9,438.22

Explanation:

For computing the price of the bond we need to apply the present value formula i.e be to shown in the attachment below:

Given that,

Future value = $10,000

Rate of interest = 3.7% ÷ 2 = 1.85%

NPER = 20 years × 2 = 40 years

PMT = $10,000 × 3.3% ÷ 2 = $165

The formula is shown below:

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

So, after applying the above formula, the price of the bond is $9,438.22