Union Local School District has bonds outstanding with a coupon rate of 5.2 percent paid semiannually...

Union Local School District has bonds outstanding with a coupon rate of 5.2 percent paid semiannually and 19 years to maturity. The yield to maturity on these bonds is 4.7 percent and the bonds have a par value of $5,000.

What is the dollar price of each bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Solutions

Expert Solution

Sol:

Par value (FV) = $5,000

Coupon rate = 5.2%, semiannually = 5.2 / 2 = 2.6%

Semiannual payment (PMT) = 5000 x 2.6% = $130

Period (NPER) = 19 years, semiannually = 19 x 2 = 38

Yield to maturity = 4.7%, semiannually = 4.7 / 2 = 2.35%

To determine dollar price (PV) of the bond we can use PV function in excel:

FV	5000
PMT	130
NPER	38
Yield	2.35%
PV	$5,311.87

Therefore dollar price of the bond is $5,311.87

Workings

jeff jeffy answered 2 years ago

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