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trasher [3.6K]
4 years ago
8

Union Local School District has a bond outstanding with a coupon rate of 2.9 percent paid semiannually and 24 years to maturity.

The yield to maturity on this bond is 3.4 percent, and the bond has a par value of $10,000. What is the price of the bond
Business
2 answers:
marta [7]4 years ago
7 0

Answer:

The bond price is $ 9,184.18  

Explanation:

I discounted all the future cash flows of the bond to present value in order to arrive at the price of the bond.

The discounting factor formula is 1/(1+r)^N where r is the rate of return of 3.4% divided by two as the return is semi-annualized and N is the relevant period of the cash flow.

The coupon is also divided by two to show that it is received twice a year.

Find attached detailed computation.

Download xlsx
Goshia [24]4 years ago
7 0

Answer: $9,184

Explanation:

In order to calculate the price of the bond, we have to calculate the present value of the bond's cash flows.

Therefore, the price ofthe bond is:

P = $145(PVIFA1.70%,48) + $10,000(PVIF1.70%,48)P = $9,184

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Answer:

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