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liq [111]
3 years ago
10

Whatever, Inc., has a bond outstanding with a coupon rate of 5.87 percent and semiannual payments. The yield to maturity is 6.9

percent and the bond matures in 13 years. What is the market price if the bond has a par value of $1,000?
Business
1 answer:
leonid [27]3 years ago
6 0

Answer:

Market price of the bond = $912.53

Explanation:

YTM = 6.90%

Coupon rate = 5.87%

Number of compounding per year = 2

YTM Per perid = 0.0345

Years = 13

Number of period = 26 (Nper)

Par value = 1,000

Semi annual coupon rate = 0.02935

The semi annual coupon payment = Par value * Semi annual coupon rate = 1,000 * 0.02935 = $29.35

Market price of the bond = PV(YTM, Nper, Semi annual coupon payment,Par value)

Market price of the bond = $912.53

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Answer:

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Assume the following: The real risk-free rate, r*, is expected to remain constant at 3%. Inflation is expected to be 3% next yea
DaniilM [7]

Answer:

This problem assumed a zero maturity risk premium, but that is probably not valid in the real world.

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