Otobo, Inc., has a bond outstanding with a coupon rate of 5.0 percent and semiannual payments....

Otobo, Inc., has a bond outstanding with a coupon rate of 5.0 percent and semiannual payments. The yield to maturity is 9.9 percent and the bond matures in 14 years. What is the market price if the bond has a par value of $6000?

Expert Solution

Statement showing price of bond when interest paid semi annually:
*(In case of semi annual bond, yield= 9.9/2= 4.95%, coupon=5/2= 2.5%, time to maturity= 142=28)**
Particulars	Time	PVf @4.95%	Amount	PV
Cash Flows (Interest)	1.00	0.9528	150.00	142.93
Cash Flows (Interest)	2.00	0.9079	150.00	136.18
Cash Flows (Interest)	3.00	0.8651	150.00	129.76
Cash Flows (Interest)	4.00	0.8243	150.00	123.64
Cash Flows (Interest)	5.00	0.7854	150.00	117.81
Cash Flows (Interest)	6.00	0.7484	150.00	112.25
Cash Flows (Interest)	7.00	0.7131	150.00	106.96
Cash Flows (Interest)	8.00	0.6794	150.00	101.91
Cash Flows (Interest)	9.00	0.6474	150.00	97.11
Cash Flows (Interest)	10.00	0.6168	150.00	92.53
Cash Flows (Interest)	11.00	0.5878	150.00	88.16
Cash Flows (Interest)	12.00	0.5600	150.00	84.00
Cash Flows (Interest)	13.00	0.5336	150.00	80.04
Cash Flows (Interest)	14.00	0.5084	150.00	76.27
Cash Flows (Interest)	15.00	0.4845	150.00	72.67
Cash Flows (Interest)	16.00	0.4616	150.00	69.24
Cash Flows (Interest)	17.00	0.4398	150.00	65.98
Cash Flows (Interest)	18.00	0.4191	150.00	62.86
Cash Flows (Interest)	19.00	0.3993	150.00	59.90
Cash Flows (Interest)	20.00	0.3805	150.00	57.07
Cash Flows (Interest)	21.00	0.3626	150.00	54.38
Cash Flows (Interest)	22.00	0.3455	150.00	51.82
Cash Flows (Interest)	23.00	0.3292	150.00	49.37
Cash Flows (Interest)	24.00	0.3136	150.00	47.04
Cash Flows (Interest)	25.00	0.2988	150.00	44.83
Cash Flows (Interest)	26.00	0.2847	150.00	42.71
Cash Flows (Interest)	27.00	0.2713	150.00	40.70
Cash Flows (Interest)	28.00	0.2585	150.00	38.78
Cash flows (Maturity Amount)	28.00	0.2585	6,000.00	1,551.00
				3,797.91
Price of bond is $3797.91

jeff jeffy answered 1 year ago

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