Answer:
$ 915.71
Explanation:
In order to determine the second bond price we need to determine the number of years to maturity of the first bond using nper formula in excel.
=nper(rate,pmt.-pv,fv)
rate is the semiannual interest rate of 6% (12%*6/12)
pmt is the semiannual interest=$1000*8.3%*6/12=$41.50
pv is the current price at $813.04
fv is the face value of $1000
=nper(6%,41.50,-813.04,1000)= 16.00
The years to maturity=16/2=8 years
The years to maturity of second bond=8+3=11 years
price of second bond=-pv(rate,nper,pmt,fv)
rate is 6%
nper is 11 years multiplied by 2= 22
pmt =5.3%*$1000=$53
fv is $1000
=-pv(6%,22,53,1000)=$915.71
