Question

In: Finance

A year ago, Perlman Co. issued a 15-year bond, at a coupon rate of 4.9% per...

A year ago, Perlman Co. issued a 15-year bond, at a coupon rate of 4.9% per annum paid semi-annually. If the bonds have a par value of $1000, and YTM is 4.5%, what is the current bond price?

Select one:

a. $1041.00

b. $1041.22

c. $1040.00

Solutions

Expert Solution

M = $1000, N = 14 * 2 = 28 SEMI-ANNUAL PERIODS, i = 4.5%/2 = 2.25% (semi-annually), C = 4.9% * $1000/2 = $24.5 (semi-annually)

P = $504.89 + $536.32

P = $1,041.22


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