Nesmith Corporation's outstanding bonds have a $1,000 par value, an 11% semiannual coupon, 20 years to...

Nesmith Corporation's outstanding bonds have a $1,000 par value, an 11% semiannual coupon, 20 years to maturity, and a 15% YTM. What is the bond's price? Round your answer to the nearest cent.

Expert Solution

Particulars	Cash flow	Discount factor	Discounted cash flow
present value Interest payments-Annuity (7.5%,40 periods)	$ 55.00	12.59441	$ 692.69
Present value of bond face amount -Present value (7.5%,40 periods)	$ 1,000.00	0.05542	$ 55.42

Bond price			$ 748.11
Face value			$ 1,000.00
Premium/(Discount)			$ (251.89)


Interest amount:
Face value	1,000
Coupon/stated Rate of interest	11.000%
Frequency of payment(once in)	6 months
Interest amount	10000.116/12=		$ 55.00

Present value calculation:
yield to maturity/Effective rate	15.00%
Effective interest per period(i)	0.15*6/12=		7.500%


Number of periods:
Particulars	Amount
Number of interest payments in a year	2
Years to maturiy	20.0
Number of periods	40

Answer is:

748.11

jeff jeffy answered 3 years ago

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