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A company issued a bond that matures 456.3876 in 5 years with a coupon rate of...

A company issued a bond that matures 456.3876 in 5 years with a coupon rate of 12% paid quarterly . If market interest is 16% what is the price of the bond ?

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Expert Solution

Maturity price of Bond = 456.3876

Required rate = 12 %

Quarterly Required return= 3%

Quarterly Interest = 3% of 456.3876 = 13.69

Number of periods = 20 Quarter in 5 years

  

Bond Value= Interest/(1+r)t + MV //(1+r)n

=13.69 /(1+ 0.04)20 + 456.3876/ (1+ 0.04)20

=(13.69 * 13.590) + (456.3876 * 0.456)

= 186.07 + 209.11

=394.18

jeff jeffy answered 2 years ago
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