Question

Harpeth Valley Water District has a bond outstanding with a coupon rate of 3.55 percent and semiannual payments. The bond matures in 22 years, with a yield to maturity of 4.11 percent, and a par value of $5,000. What is the market price of the bond

Answer 1

Answer:

$4,597.10

Explanation:

In this question we use the Present value formula that is shown on the attachment below:

Given that,  

Future value = $5,000

Rate of interest = 4.11%

÷ 2 = 2.055%

NPER = 22 years × 2 = 44 years

PMT = $5,000 × 3.55%  ÷ 2 = $88.75

The formula is shown below:

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

So, after solving this, the market price of the bond is $4,597.10