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aleksklad [387]
3 years ago
5

Coca-Cola Enterprises issues a 0.07 semi-annual coupon bond with 16 years of maturity. What is the bond's price if the yield to

maturity (YTM) is 0.13?a. $1,020 b. $1,162 c. $932 d. $1,216 e. $600
Business
1 answer:
Westkost [7]3 years ago
4 0

Answer:

Bond Price​= $600

Explanation:

Giving the following information:

Face value= $1,000

Number of periods= 16*2= 32

Cupon= (0.07/2)*1,000= $35

YTM= 0.13/2 = 0.065

<u>To calculate the price of the bond, we need to use the following formula:</u>

Bond Price​= cupon*{[1 - (1+i)^-n] / i} + [face value/(1+i)^n]

Bond Price​= 35*{[1 - (1.065^-32)] / 0.065} + [1,000/(1.065^32)

Bond Price​= 466.69 + 133.29

Bond Price​= $600

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