12. A 11-year bond with a face value of $5000 is redeemable at par and earns...

12. A 11-year bond with a face value of $5000 is redeemable at par and earns interest at 10.3% convertible semiannually. If the yield rate is 7% convertible semiannually, find the book value 2 months before the payment of the 9th coupon. (Use simple interest for the time between coupon payments.)

Value = $ (3 decimal place)

Expert Solution

Initial Bond Value = PV of Interest Payments & redemption Value

Half Year	Payments	PVIF/PVIFA	PV of Payments
1-22	257.5	15.1671	3,906
22	5000	0.4692	2,346
			6,251

Bond Amortization Schedule:

Half Year	Beginning Bond Value	Interest Expense	Interest Payment	Ending Value Bond
1	6,251	219	258	6,213
2	6,213	217	258	6,173
3	6,173	216	258	6,131
4	6,131	215	258	6,088
5	6,088	213	258	6,044
6	6,044	212	258	5,998
7	5,998	210	258	5,950
8	5,950	208	258	5,901
9	5,901	207	258	5,850
10	5,850	205	258	5,797
11	5,797	203	258	5,743
12	5,743	201	258	5,686
13	5,686	199	258	5,628
14	5,628	197	258	5,567
15	5,567	195	258	5,504
16	5,504	193	258	5,440
17	5,440	190	258	5,372
18	5,372	188	258	5,303
19	5,303	186	258	5,231
20	5,231	183	258	5,157
21	5,157	180	258	5,080
22	5,080	178	5,258	0

Book Value of bond 2 months before payment of 9th Coupon = Ending Value after 8th Half Year + 2 months interest

= 5901+(5901*3.5%*2/6)

= 5901+69 = 5,970

ekkarill92 answered 1 year ago

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