1. A semi-annual coupon bond with 25 years until maturity has a coupon rate of 7.2...

1. A semi-annual coupon bond with 25 years until maturity has a coupon rate of 7.2 percent and a yield to maturity of 6 percent. If the par value is $1000, what is the price of the bond?

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Expert Solution

Semiannual interest = $1,000 * 0.072 * 6/12 = $36

The price of the bond is:

Current bond price = $36(PVIFA 3%,50) + $1,000(PVIF 3%,50)

Current bond price = ($36 * 25.7297640011) + ($1,000 * 0.22810707966)

Current bond price = $1,154.38

jeff jeffy answered 2 years ago

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