Dexter Mills issued 20-year bonds one year ago at a coupon rate of 10.2 percent. The bonds make semiannual payments and have a p
ar value of $1,000. If the YTM is 8.2 percent, what is the current bond price?
1 answer:
Answer:
$1,190.93
Explanation:
In this question, we use the present value formula that is shown in the attachment. Kindly find it below:
Given that,
Future value = $1,000
Rate of interest = 8.2% ÷ 2 = 4.1%
NPER = (20 years - 1 years) × 2 = 38 years
PMT = $1,000 × 10.2% ÷ 2 = $51
The formula is shown below:
= -PV(Rate;NPER;PMT;FV;type)
So, after solving this, the current bond price is $1,190.93
You might be interested in
Answer:
option (d) $929.42
Explanation:
Data provided in the question:
Coupon bonds payments = 5.65% semiannual
Yield to maturity, r = 6.94% = 0.0694
Face value = $1000
Now,
Coupon bond payments = × $1,000
= $28.25
market price per bond = Payment × +
Here,
n is the maturity period and 2n is due to the semiannual payments
Thus,
market price per bond = $28.25 × +
= $28.25 × 10.942 + 620.3
= $929.42
Hence,
The answer is option (d) $929.42