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Corporation has an outstanding bond with a coupon rate of 8.55 percent that matures in 12...

Corporation has an outstanding bond with a coupon rate of 8.55 percent that matures in 12 years. The bond pays interest semiannually. What is the market price of a $1,000 face value bond if the yield to maturity is 10.13 percent?

Solutions

Expert Solution

Price of bond = Coupon * PVIFA (n,i)+ face value * PVIF (n,i)

Price of bond= (1,000*8.55%/2)* PVIFA (24 , 10.13%/2) + 1000* PVIF (24,10.13%/2)

Price of bond = 42.75 *13.711813546825 + 1000 *0.3054966438533150  

= $ 891.68

Hence the correct answer is $ 891.68

jeff jeffy answered 2 years ago
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