Bond price

Weismann Co. issued 15-year bonds a year ago at a coupon rate of 4.9 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 4.5 percent, what is the current bond price?

Solutions

Expert Solution

To find the price of this bond, we need to realize that the maturity of the bond is 14 years. The bond was issued 1 year ago, with 15 years to maturity, so there are 14 years left on the bond. Also, the coupons are semiannual, so we need to use the semiannual interest rate and the number of semiannual periods. The price of the bond is:

P = $24.50(PVIFA_2.25%,28) + $1,000(PVIF_2.25%,28)

P = $1,041.22

Using FC, N= 28, I =2.25%, PMT= 49/2= 24.50, FV= 1000. CPT PV $1,041.22

Amanda answered 2 years ago

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