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Apple just issued 6.2% coupon 20 year bonds that have a YTM of 7% and pay...

Apple just issued 6.2% coupon 20 year bonds that have a YTM of 7% and pay semiannually. What is the current price?

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Expert Solution

Face/Par value 1000
Coupon rate 6.20%
Annual coupon 62
Semiannual coupon 31
Time to maturity 20 years
Present value = Future value/[(1+(r/m))^mt]
where C is the present value
r is the interest rate that is .07
mt is the time period
m is the compounding period that is 2
price of bond = sum of present values of future cash flows
r 0.035
mt 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
future cash flow 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 1031
present value 29.95 28.94 27.96 27.01 26.10 25.22 24.37 23.54 22.75 21.98 21.23 20.52 19.82 19.15 18.50 17.88 17.27 16.69 16.12 15.58 15.05 14.54 14.05 13.58 13.12 12.67 12.25 11.83 11.43 11.04 10.67 10.31 9.96 9.62 9.30 8.98 8.68 8.39 8.10 260.40
sum of present values 914.58
The current price of the bond is $914.58.

jeff jeffy answered 2 years ago
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