A 5000 face value bond with a term of 10 years and a coupon rate of...

A 5000 face value bond with a term of 10 years and a coupon rate of 8% payable quarterly is purchased to yield 7.2% convertible quarterly. Find the purchase price.

Expert Solution

price of coupon = Coupon payment per period * [1-(1+i)^-n]/i + par value/(1+i)^n

i = interest rate per period

n = number of periods

=>

Price = (5000*0.08/4) * [1-(1+0.072/4)^-40]/(0.072/4) + 5000/(1+0.072/4)^40

= 5283.40

jeff jeffy answered 2 years ago

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