Consider the following bond issued by Halliburton: coupon rate: 2.067%, with semi-annual coupon payments Face value:...

Consider the following bond issued by Halliburton: coupon rate: 2.067%, with semi-annual coupon payments Face value: $1,000 Maturity date: August 1, 2023 Assume that today is August 2, 2016. Suppose, for the sake of argument, that the annual discount rate is 7.636%, with semi-annual compounding. What is the value of the bond? Do not round at intermediate steps in your calculation. Round your answer to the nearest penny. Do NOT include a minus sign! Do not type the $ symbol.

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Expert Solution

Price of a bond is present value of cash flows associated with the bond - namely coupons and maturity value, discounted at market interest rate.

Price of a bond is mathematically represented as:

where P is price of bond with periodic coupon C, periodic YTM i, n periods to maturity and M face value.

C = 2.067% * $1000/2 = $10.335 --> Semi-annual

M = $1000

i = 3.818%

n = 7 * 2 = 14 semi-annual periods

P = 110.49 + 591.81

P = 702.30

jeff jeffy answered 1 year ago

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