Question

Haswell Enterprises' bonds have a 10-year maturity, a 6.25% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 4.75%, based on semiannual compounding. What is the bond's price?
A) 1,063.09
B) 1,090.35
C) 1,118.31
D) 1,146.27
E) 1,174.93

Answer 1

Answer:

C) 1,118.31

Explanation:

We use the PV function that is shown in the attachment

The NPER refers the time period.

Given that,  

Future value or par value = $1,000

Rate of interest = 4.75% ÷ 2 = 2.375%

NPER = 10 years  × 2 = 20 years

PMT = ($1,000 × 6.25%) ÷ 2 = $31.25

The formula is shown below:

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

So, after solving this, the answer would be $1,118.31