You purchase a 10 year 12% semiannual bond with a YTM of 11% and a face...

You purchase a 10 year 12% semiannual bond with a YTM of 11% and a face value of $10,000. What is the value of the first payment you’ll receive from the bond?

		$600
		$1200
		$550
		$1100

Solutions

Expert Solution

Semiannual interest = $1,000 * 0.12 * 6/12 = $60

The price of the bond is:

Current bond price = $60(PVIFA 5.5%,20) + $1,000(PVIF 5.5%,20)

Current bond price = ($60 * 11.9503824838) + ($1,000 * 0.34272896327)

Current bond price = $1100

jeff jeffy answered 2 years ago

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