Question

In: Finance

A year ago, Co. sold 17yr bonds. The coupon rate is7.8%. Face value is $1,000. They're...

A year ago, Co. sold 17yr bonds. The coupon rate is7.8%. Face value is $1,000. They're semiannual payments.

Required:

The YTM is 5.5%, what's the price? Hint: don't forget to adjust the maturity for it being a year later, so the NPER has declined by two semi-annual periods. Once again, for all the semi-annual problems divide the coupon rate and YTM by 2, and multiply NPER by 2.  (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

  Current bond price $   

Solutions

Expert Solution

Price of Bond = PV of Cfs from it.

Particulars Amount
Coupon Amount $         39.00
Maturity Value $    1,000.00
Disc Rate 2.750%
Starting 1
Ending on 32
Period Cash Flow PVF/ PVAF @2.75 % Disc CF
'1 - 32 $      39.00                     21.1003 $    822.91
'32 $ 1,000.00                       0.4197 $    419.74
Bond Price $ 1,242.65

PVAF = Sum [ PVF(r%, n) ]
PVF = 1 / ( 1 + r)^n
Where r is int rate per Period
Where n is No. of Periods

PVAF using Excel:
+PV(Rate,NPER,-1)
Rate = Disc rate
Nper = No. of Periods

Pls comment, if any further assistance is required,


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