Question

In: Finance

________ 16. Seven years ago, Peterborough Trucking issued 15-year bonds with a face value of $1,000...

________ 16. Seven years ago, Peterborough Trucking issued 15-year bonds with a face value of $1,000 each. Today,

the market rate of return on these bonds is 7.9 percent and the market price is $984.20 The bonds pay

interest semi-annually. What is the coupon rate?

a. 6.67 percent b. 6.85 percent c. 7.63 percent d. 7.76 percent

________ 18. Today, you paid a total of $1,108.16 to purchase a $1,000 bond. The bond has a 6 percent coupon and pays

interest semi-annually. The next interest payment is 4 months from today. What is the clean price of this

bond?

a. $1,088.16 b. $1,098.16 c. $1,108.16 d. $1,128.16

Expert Solution

Question 15:

Coupon rate= 7.63% (Option c)

Calculation as follows:

Question 16:

Clean price= Dirty price (price actually paid)- Accrued interest.

Given, price paid= $1,108.16

Face value= $1,000. Coupon rate= 6%.

Frequency of coupon payment= Semi annual (6 months interval)

Next coupon after 4 months. Hence period since last coupon= 6-4= 2 months

Accrued interest= $1,000*6%*2/12 = $10

Therefore, clean price= $1,108.16-$10 = $1,098.16 (Option b)

jeff jeffy answered 1 year ago

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