Harrison Co. issued 14-year bonds one year ago at a coupon rate of 6.9 percent. The bonds make semiannual payments. If the YTM o

Question

3 years ago

11

n these bonds is 5.5 percent, what is the current dollar price assuming a $1,000 par value?

1 answer:

mixas84 [53] · Answer 1 · 2022-10-05T18:29:59+03:00

Answer:

Bond Price= $1,128.82

Explanation:

Giving the following information:

Time= 13*2= 26

Cupon= (0.069/2)*1,000= 34.5

YTM= 0.055/2= 0.0275

Par value= $1,000

<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= 34.5*{[1 - (1.0275^-26)] / 0.0275} + [1,000/(1.0275^26)]

Bond Price= 634.88 + 493.94

Bond Price= $1,128.82