Question
In: Finance
Weismann Co. issued 7-year bonds a year ago at a coupon rate of 11 percent. The...
Weismann Co. issued 7-year bonds a year ago at a coupon rate of 11 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 8 percent, what is the current bond price?
Solutions
Expert Solution
To find the price of this bond, we need to realize that the maturity of the bond is 6 years. The bond was issued 1 year ago, with 7 years to maturity, so there are 6 years left on the bond.
Semiannual interest = $1,000 * 0.11 * 6/12 = $55
The price of the bond is:
Current bond price = $55(PVIFA 4%,14) + $1,000(PVIF 4%,14)
Current bond price = ($55 * 10.5631229289) + ($1,000 * 0.57747508275)
Current bond price = $1,158.45
jeff jeffy answered 2 years agoRelated Solutions
Weismann Co. issued 11-year bonds a year ago at a coupon rate of 7 percent. The...
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