Question

Doisneau 15​-year bonds have an annual coupon interest of 12 ​percent, make interest payments on a semiannual​ basis, and have a ​$1000 par value. If the bonds are trading with a​ market's required yield to maturity of 13 ​percent, are these premium or discount​ bonds? Explain your answer. What is the price of the​ bonds? (round to the nearest cent)

Answer 1

Period	Cash Flow	Discounting Factor [1/(1.065^year)]	PV of Cash Flows (cash flows*discounting factor)
1	60	0.938967136	56.33802817
2	60	0.881659283	52.89955697
3	60	0.827849092	49.67094551
4	60	0.777323091	46.63938545
5	60	0.729880837	43.79285019
6	60	0.685334119	41.12004713
7	60	0.643506215	38.61037289
8	60	0.604231188	36.25387126
9	60	0.567353228	34.04119367
10	60	0.532726036	31.96356213
11	60	0.50021224	30.0127344
12	60	0.469682854	28.18097126
13	60	0.441016765	26.46100588
14	60	0.414100249	24.84601491
15	60	0.388826524	23.32959147
16	60	0.365095328	21.90571969
17	60	0.342812515	20.56875088
18	60	0.321889685	19.31338111
19	60	0.302243836	18.13463015
20	60	0.283797029	17.02782174
21	60	0.266476083	15.98856501
22	60	0.250212285	15.0127371
23	60	0.234941113	14.09646676
24	60	0.220601984	13.23611902
25	60	0.207138013	12.42828077
26	60	0.194495787	11.6697472
27	60	0.182625152	10.95750911
28	60	0.171479016	10.28874095
29	60	0.16101316	9.660789624
30	60	0.151186066	9.071163967
30	1000	0.151186066	151.1860661
		Price of the Bond = Sum of PVs	934.7066205

Price of Bond = $934.71

As the Price is LOWER THAN PAR VALUE, it is a Discount Bond. Also, the Coupon Rate is LOWER THAN YIELD RATE, therefore, it will trade at Discount.