(1 pt) A 12-year bond with a face value of 5000 dollars is redeemable at par...

(1 pt) A 12-year bond with a face value of 5000 dollars is redeemable at par and earns interest at 10.3 percent convertible semiannually. If the yield rate is 6.9 percent convertible semiannually, find the book value 2 months before the payment of the 9th coupon.
Answer = dollars.

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Expert Solution

Book value after 8th coupon is:

Remaining coupons 16;

Particulars	Cash flow	Discount factor	Discounted cash flow
present value Interest payments-Annuity (3.45%,16 periods)	$ 257.50	12.13966	$ 3,125.96
Present value of bond face amount -Present value (3.45%,16 periods)	$ 5,000.00	0.58118	$ 2,905.91

Bond price			$ 6,031.87

Book value after 4 months of coupon payment = 6031.87*(1+ 6.9%*4/12) - 5000*10.3%*4/12

= 5,998.94

answer is 5,998.94

please rate.

jeff jeffy answered 1 year ago

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