Wine and Roses, Inc., offers a bond with a coupon of 10.0 percent with semiannual payments and a yield to maturity of 11.00 perc

Question

3 years ago

7

ent. The bonds mature in 9 years. What is the market price of a $1,000 face value bond?

1 answer:

romanna [79] · Answer 1 · 2022-04-30T07:28:51+03:00

Answer:

$943.77

Explanation:

We use the present value formula i.e to be shown in the attachment below:

Data provided in the question

Future value = $1,000

Rate of interest = 11% ÷ 2 = 5.5%

NPER = 9 years × 2 = 18 years

PMT = $1,000 × 10% ÷ 2 = $50

The formula is shown below:

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

So, after solving this, the market price of the bond is $943.77