Question

W7 2/12

​(Related to Checkpoint​ 9.3) ​(Bond valuation)  Calculate the value of a bond that matures in

1818

years and has a

$ 1 comma 000$1,000

par value. The annual coupon interest rate is

1212

percent and the​ market's required yield to maturity on a​ comparable-risk bond is

1111

percent.

The value of the bond is

​$nothing.

​ (Round to the nearest​ cent.)

Answer 1

Correct Answer:

The value of the bond is $ 1,077

		Formula Applied
Face Value of Bond	$                              1,000
Interest Annually @ 12 % (12/100 * 1,000)	$                                  120	(Face Value of Bonds * Coupon rate )
Semi-Annual Effective interest Rate ® ( 11%)	0.110	11%
Time Period (n) 18 years	18.00	18
Present Value of Face Value of Bond	$                     152.82218	Face Value/(1+r%)^2n
Present Value of Interest payment	$                            924.19	Interest * ((1-(1+r)^-n)/r)
Issue Price Of Bond	$                              1,077	PV of Face value of bond + PV of Interest Paid Annually
Premium or (Discount)	$                                    77	Issue Price - Face Value of Bonds

End of answer.

Thanks.