sixteen years ago, national distributors issued 30-year bonds that have a face value of $1000 and...

sixteen years ago, national distributors issued 30-year bonds that have a face value of $1000 and a coupon rate of 8.55%. the bond pays coupons semiannually. the required return in the market is 7.48%.

1. What is the price today?

2. What is the formula you used

3. what is the value for the number of periods (t) used in the equation?

4. What is the value for interest rate used in the equation?

Expert Solution

1. $ 1,091.88

2. =-pv(rate,nper,pmt,fv)

3. 28

4. 3.74%

working:

Price today of bond is the present value of cash flows of remaining period which is calculated as follows:

Present value of cash flows		=-pv(rate,nper,pmt,fv)
		= $1,091.88

Where,
rate	=	Interest rate per coupon period	=	7.48%/2	=	3.74%
nper	=	Number of coupon period	=	(30-16)*2	=	28
pmt	=	Coupon Payment	=	10008.55%6/12	=	$42.75
fv	=	Face Value			=	$1,000.00

jeff jeffy answered 2 years ago

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