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cluponka [151]
3 years ago
13

has issued bonds that have a 8% coupon rate, payable semiannually. The bonds mature in 8 years, have a face value of $1,000, and

a yield to maturity of 5%. What is the price of the bonds
Business
1 answer:
snow_tiger [21]3 years ago
3 0

Answer:

Bond Price​= $1,195.82

Explanation:

Giving the following information:

Face value= $1,000

YTM= 0.05/2= 0.025

Years tomaturity= 8*2= 16 semesters

Coupon= (0.08/2)*1,000= $40

<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​= 40*{[1 - (1.025^-16)] / 0.025} + [1,000/(1.025^16)]

Bond Price​= 522.2 + 673.62

Bond Price​= $1,195.82

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Answer: should be protected due to the fact that their account is insured by FDIC.

Explanation:

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Based on the above scenario, Xavier and Alyssa should be protected due to the fact that their account is insured by FDIC. Since the bank is insured, their money is safe.

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