In: Finance
14.
Harrimon Industries bonds have 5 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 9%.
%
%
a
1
K = N |
Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k] + Par value/(1 + YTM)^N |
k=1 |
K =5 |
846 =∑ [(9*1000/100)/(1 + YTM/100)^k] + 1000/(1 + YTM/100)^5 |
k=1 |
YTM% = 13.42 |
2
K = N |
Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k] + Par value/(1 + YTM)^N |
k=1 |
K =5 |
1164 =∑ [(9*1000/100)/(1 + YTM/100)^k] + 1000/(1 + YTM/100)^5 |
k=1 |
YTM% = 5.19 |
b
K = N |
Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k] + Par value/(1 + YTM)^N |
k=1 |
K =5 |
Bond Price =∑ [(9*1000/100)/(1 + 12/100)^k] + 1000/(1 + 12/100)^5 |
k=1 |
Bond Price = 891.86 |