Question

The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in 15 years. The bond certificate indicates that the stated coupon rate for this bond is 8% and that the coupon payments are to be made semiannually.


Assuming the appropriate YTM on the Sisyphean bond is 7.5%, then the price that this bond trades for will be closest to:

Select one:

A. $1000

B. $1045

C. $957

D. $691

Answer 1

Value of Bond = PV of CFs from it.

Period	CF	PF @3.75%	Disc CF
1	$      40.00	0.9639	$      38.55
2	$      40.00	0.9290	$      37.16
3	$      40.00	0.8954	$      35.82
4	$      40.00	0.8631	$      34.52
5	$      40.00	0.8319	$      33.28
6	$      40.00	0.8018	$      32.07
7	$      40.00	0.7728	$      30.91
8	$      40.00	0.7449	$      29.80
9	$      40.00	0.7180	$      28.72
10	$      40.00	0.6920	$      27.68
11	$      40.00	0.6670	$      26.68
12	$      40.00	0.6429	$      25.72
13	$      40.00	0.6197	$      24.79
14	$      40.00	0.5973	$      23.89
15	$      40.00	0.5757	$      23.03
16	$      40.00	0.5549	$      22.19
17	$      40.00	0.5348	$      21.39
18	$      40.00	0.5155	$      20.62
19	$      40.00	0.4969	$      19.87
20	$      40.00	0.4789	$      19.16
21	$      40.00	0.4616	$      18.46
22	$      40.00	0.4449	$      17.80
23	$      40.00	0.4288	$      17.15
24	$      40.00	0.4133	$      16.53
25	$      40.00	0.3984	$      15.94
26	$      40.00	0.3840	$      15.36
27	$      40.00	0.3701	$      14.80
28	$      40.00	0.3567	$      14.27
29	$      40.00	0.3438	$      13.75
30	$      40.00	0.3314	$      13.26
30	$1,000.00	0.3314	$    331.40
Value of Bond	$1,044.57

Option B is correct.