Union Local School District has a bond outstanding with a coupon rate of 3.7% paid semiannually...

Union Local School District has a bond outstanding with a coupon rate of 3.7% paid semiannually and 16 years to maturity. The yield to maturity is 3.9% and the bond has a par value of $5,000. What is the price of the bond?

Solutions

Expert Solution

Price of Bond = $4,882 or $4,881.80

The final answer may vary due to rounding off in PV factor

Working

Bonds issue price is calculated by ADDING the:

Discounted face value of bonds payable at market rate of interest, and

Discounted Interest payments amount (during the lifetime) at market rate of interest.

	Annual Rate	Applicable rate	Face Value	$ 5,000
Market Rate	3.90%	1.95%	Term (in years)	16
Coupon Rate	3.70%	1.85%	Total no. of interest payments	32

Calculation of Issue price of Bond
	Bond Face Value		Market Interest rate (applicable for period/term)
PV of	$ 5,000	at	1.95%	Interest rate for	32	term payments
PV of $1	0.53902
PV of	$ 5,000	=	$ 5,000	x	0.53902	=	$ 2,695	A

Interest payable per term	at	1.85%	on	$ 5,000
Interest payable per term	$ 93

PVAF of 1$	for	1.95%	Interest rate for	32	term payments
PVAF of 1$	23.63976
PV of Interest payments	=	$ 93	x	23.63976	=		$ 2,187	B

				Bond Value (A+B)			$ 4,881.80

ekkarill92 answered 2 months ago

Next > < Previous

Related Solutions

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.)

Union Local School District has bonds outstanding with a coupon rate of 4.6 percent paid semiannually...

Union Local School District has bonds outstanding with a coupon rate of 4.6 percent paid semiannually and 21 years to maturity. The yield to maturity on these bonds is 3.9 percent and the bonds have a par value of 5000. What is the dollar price of each bond?

Union Local School District has a bond outstanding with a coupon rate of 3.6 percent paid...

Union Local School District has a bond outstanding with a coupon rate of 3.6 percent paid semiannually and 12 years to maturity. The yield to maturity on this bond is 2.4 percent, and the bond has a par value of $5,000. What is the price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

A bond has 10% coupon rate (coupon paid semiannually) and it has 10 years left to...

A bond has 10% coupon rate (coupon paid semiannually) and it has 10 years left to maturity. The face value is $1000. If the bond currently sold for $1100. What is the yield to maturity? If suddenly the interest rate decreases 2%, what is the new bond price? What is the percentage change of bond price?

A bond has annual coupon rate of 7%, with interest paid semiannually. The bond matures in...

A bond has annual coupon rate of 7%, with interest paid semiannually. The bond matures in seven years. At a market discount rate of 5%, the price of this bond per 100 of par value is closest to: Round your answer to 2 decimal places.

A bond offers a coupon rate of 5%, paid semiannually, and has a maturity of 20...

A bond offers a coupon rate of 5%, paid semiannually, and has a maturity of 20 years. If the current market yield is 8%, what should be the price of this bond?

A $ 5000 bond with a coupon rate of 5.9% paid semiannually has two years to...

A $ 5000 bond with a coupon rate of 5.9% paid semiannually has two years to maturity and a yield to maturity of 6.7%. If interest rates fall and the yield to maturity decreases by 0.8%, what will happen to the price of the bond?

A bond has a coupon rate of 7.5% paid semiannually, a par value of $1000, a...

A bond has a coupon rate of 7.5% paid semiannually, a par value of $1000, a maturity of 10 years and a yield to maturity of 9%. You are thinking about buying this bond but are unsure about the actual cash outlay required to do so. The last interest payment was December 13, 2018. If you purchase the bond, the transaction will settle on February 25, 2019. There are 75 days between these two dates. a) Find the clean price...

A $ 5,000 bond with a coupon rate of 5.8% paid semiannually has tenten years to...

A $ 5,000 bond with a coupon rate of 5.8% paid semiannually has tenten years to maturity and a yield to maturity of 7%. If interest rates rise and the yield to maturity increases to 7.3%, what will happen to the price of the bond?

A bond offers a coupon rate of 6%, paid semiannually, and has a maturity of 17...

A bond offers a coupon rate of 6%, paid semiannually, and has a maturity of 17 years. If the current market yield is 3%, what should be the price of this bond?

Subjects