Dave has been suggested to assume his firm is operating at full capacity and its net fixed assets can be added by any amount. Th
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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 [ ] +
= $ 36.5 × [ ( 1 - ] / 0.0265 ] +
= $ 36.5 × 21.39526 + $ 433.0255
= $ 780.92699 + $ 433.0255
= $ 1,213.95