A bond that pays interest semiannually has a coupon rate of 5.44 percent and a current yield of 4.91 percent. The par value is $

Question

3 years ago

13

1,000. What is the bond's price

1 answer:

Aleksandr [31] · Answer 1 · 2022-09-02T22:58:45+03:00

Answer:

Results are below.

Explanation:

Giving the following information:

Cupon rate= 0.0544/2= 0.0272

YTM= 0.0491/2= 0.02455

The par value is $1,000

<u>We weren't provided with the number of years of the bond. I imagine for 9 years.</u>

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

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

Bond Price= 27.2*{[1 - (1.02455^-18)] /0.02455} + [1,000*(1.02455^18)]

Bond Price= 391.93 + 646.25

Bond Price= $1,038.18