Harrison Co. issued 15-year bonds one year ago at a coupon rate
of 6.6 percent. The bonds make semiannual payments.
If the YTM on these bonds is 5.5 percent, what is the current
dollar price assuming a $1,000 par value? (Do not round
intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.)
Current bond price:
HI
Here since the bond is offered one year ago hence its current time period will be 15-1= 14 years
coupon rate = 6.6 percent semiannualy so we will take coupon paymant = 3.3 percent per period
hence per period coupon payment= 1000*3.3%= 33
and total period will be 14*2=28 percent
and YTM is 5.5 % so per period YTM= 5.5%/2 = 2.75%
So now we will get the price of bond using excel PV function
formula= PV(rate,nper,PMT,fv)
here rate = 2.75%= 0.0275
nper= 28
PMT= 33
and fv= face value = $1000
so using this formula price of bond = $1,106.43
In excel this value wil come negative because this is a payment for bond.
Thanks
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