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sertanlavr [38]
3 years ago
5

Dufner Co. issued 14-year bonds one year ago at a coupon rate of 7.9 percent. The bonds make semiannual payments. If the YTM on

these bonds is 5.6 percent, what is the current dollar price assuming a par value of $1,000
Business
1 answer:
valentinak56 [21]3 years ago
4 0

Answer:

Bond price= $1,210.4

Explanation:

Giving the following information:

Coupon rate= 0.079/2= 0.0395

YTM= 0.056/2= 0.028

Face value= $1,000

n= 13*2= 26

<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= 39.5*{[1 - (1.028^-26)]/0.028} + [1,000 / 1.028^26]

Bond price= 722.67 + 487.73

Bond price= $1,210.4

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