Layton Corp. has a $2,000 par value bond outstanding with a coupon rate of 4.6 percent paid semiannually and 13 years to maturit

Question

2 years ago

10

y. The yield to maturity of the bond is 3.8 percent. What is the dollar price of the bond

1 answer:

Leni [432] · Answer 1 · 2022-06-27T17:06:37+03:00

Answer:

Bond Price= $2,162.94

Explanation:

Giving the following information:

Par value= $2,000

YTM= 0.038/2= 0.019

Coupon= (0.046/2)*2,000= $46

Years to maturity= 13*2= 26

<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= 46*{[1 - (1.019^-26)] / 0.019} + [2,000 / (1.019^26)]

Bond Price= 936.91 + 1,226.03

Bond Price= $2,162.94