Question

In: Finance

Bond price: Knight, inc, has issued a three year bond that pays a coupon rate of...

Bond price: Knight, inc, has issued a three year bond that pays a coupon rate of 6.10 percent coupon payments are made semiannually. Given the market rate of interest of 5.80 percent, what is the market value of the bond?

Solutions

Expert Solution

Assuming par value as $1000, the bond price is calculated in excel below

Semiannual coupon payment = (6.10%/2)*$1000

= $30.5

Semiannual interest rate =5.80%/2 = 2.90%

The market value of the Bond is therefore = 1008.15


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