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An insurance company purchases corporate bonds in the secondarymarket with six years to maturity. Total...

An insurance company purchases corporate bonds in the secondary market with six years to maturity. Total par value is $55000000. The coupon rate is 11%, with annual interest payments. If the required rate of return is 1.7 percent, what will the market value of the bonds be then? State the answer as a number with 2 decimals without $ sign.

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Expert Solution

Price of the bond = Present value of coupons and face value discounted at ytm.

Face Value = 55000000

Coupon Amount = 11% * 55000000 = 6050000

Number of payments = 6

Ytm = 1.7%

Price =  6050000/(1+0.017)^1 + 6050000/(1+0.017)^2 + 6050000/(1+0.017)^3+ 6050000/(1+0.017)^4 + 6050000/(1+0.017)^5 +6050000/(1+0.017)^6 + 55000000/(1+0.017)^6

Price = 83943664.18 Answer

jeff jeffy answered 2 years ago
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