Jeremy Kohn is planning to invest in a 11-year bond that pays a 11.7

Jeremy Kohn is planning to invest in a 11-year bond that pays a 11.7 percent coupon. The current market rate for similar bonds is 11.2 percent. Assume semiannual coupon payments. What is the maximum price that should be paid for this bond? (Do not round intermediate computations. Round your final answer to the nearest dollar.)

Expert Solution

Par Value of Bond =$1000

Number of Periods = 11*2 = 22

Semi Annual Rate(r) = 11.2%/2 = 5.60%

Since there is semi coupon payments number of periods is doubled and rate gets divided by 2.

Price of bond is sum of PV of coupons and PV of Par Value.

Maximum Price that you should pay for this bond = $1,031.

Junaid answered 2 years ago

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