In: Finance
(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.
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
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