Answer:
at 4% $238,904.53
at 5% $215,000
at 6% $194,118.66
Step-by-step explanation:
Yield is the return received on the investment, The rate of yield is determined by calculating the percentage of return to total investment.
Price of the bond is the present value of all cash flows of the bond. These cash flows include the coupon payment and the maturity payment of the bond.
According to given data
Face value of the bond is $215,000
Coupon payment = C = $10750 annually
Number of periods = n = 15 years
Price of the bond is calculated by following formula:
Price of the Bond = C x [ ( 1 - ( 1 + r )^-n ) / r ] + [ F / ( 1 + r )^n ]
Yield = 4% annually
Price of the Bond = 10,750 x [ ( 1 - ( 1 + 4% )^-15 ) / 4% ] + [ $215,000 / ( 1 + 4% )^15 ] = $238,904.53
Yield = 5% annually
Price of the Bond = 10,750 x [ ( 1 - ( 1 + 5% )^-15 ) / 5% ] + [ $215,000 / ( 1 + 5% )^15 ] = $215,000
Yield = 6% annually
Price of the Bond = 10,750 x [ ( 1 - ( 1 + 6% )^-15 ) / 6% ] + [ $215,000 / ( 1 + 6% )^15 ] = $194,118.66
