Question
In: Finance
Grohl Co. issued 16-year bonds a year ago at a coupon rate of 11 percent. The...
Grohl Co. issued 16-year bonds a year ago at a coupon rate of 11
percent. The bonds make semiannual payments. If the YTM on these
bonds is 7 percent, what is the current bond price? _18_2012 ?
$1,367.84 ? $1,246.88 ? $1,377.84 ? $1,647.72 ? $596.15
Solutions
Expert Solution
Pricd of a bond is present value of all cashflows associated with the bond, namely coupons and maturity value, discounted at required rate of return (or yield to maturity). Mathematically it can be represented as:
Now, our bond is a semi-annual coupon paying bond.
M =$1000, n = 15 * 2 = 30 semi annual periods, i =7%/2 = 3.5% semi annually, C = 11%/2 = $55 per semi annual period. Substituting these values:
P = 1367.84 --> Answer
jeff jeffy answered 1 year agoRelated Solutions
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