Answer:
$5,563
Explanation:
Calculation to determine the market price of the bond
First step is to calculate price of the bond 3 years and 4 months before the bond matures
Bonds price=$5,640 (1.03)^2/6
Bonds price=$5,695.84
Second step is to calculate the accrued coupon
Accrued coupon=1,000(8%/2)[(1.03)^2/6−1÷0.03
Accrued coupon=1,000(.04)[(1.03)^2/6−1÷0.03]
Accrued coupon=400[(1.03)^2/6−1÷0.03]
Accrued coupon=$132.02
Now let determine the the market price of the bond
Market price of Bond=$5,695.84−$132.02
Market price of Bond=$5,563
Therefore the market price of the bond is $5,563
