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Alex Ar [27]
3 years ago
7

A bond that pays interest semiannually has a coupon rate of 5.08 percent and a current yield of 5.37 percent. The par value is $

1,000. What is the bond's price
Business
1 answer:
Zolol [24]3 years ago
4 0

Answer:

$997

Explanation:

The price of the Bond is its Present Value. thus we need to discount the future cash flows (payments and capital repayments) to find the price as follows.

<em>Note : I am using a financial calculator here</em>

FV = $1,000

P/Yr = 2

N = 1 x 2 = 2

PMT = ($1,000 x 5.08 %) ÷ 2 = $25.40

YTM =  5.37 %

PV = ?

Conclusion

Assuming the Bond Matures in 1 year, the bond's price is $997

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