Nesmith Corporation's outstanding bonds have a $1,000 par value, an 8% semiannual coupon, 15 years to...

Nesmith Corporation's outstanding bonds have a $1,000 par value, an 8% semiannual coupon, 15 years to maturity, and a 12% YTM. What is the bond's price? Round your answer to the nearest cent.

Solutions

Expert Solution

K = Nx2

Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2

k=1

K =15x2

Bond Price =∑ [(8*1000/200)/(1 + 12/200)^k] + 1000/(1 + 12/200)^15x2

k=1

Bond Price = 724.7

Using Calculator: press buttons "2ND"+"FV" then assign

PMT = Par value * coupon %/coupons per year=1000*8/(2*100)

I/Y =12/2

N =15*2

FV =1000

CPT PV

Using Excel

=PV(rate,nper,pmt,FV,type)

=PV(12/(2*100),2*15,-8*1000/(2*100),-1000,)

jeff jeffy answered 1 year ago

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