Question

Oriole, Inc., has issued a three-year bond that pays a coupon rate of 6.9 percent. Coupon payments are made semiannually. Given the market rate of interest of 4.8 percent, what is the market value of the bond? (Round answer to 2 decimal places, e.g. 15.25.)

Answer 1

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

=>

market value

= 69/2 * [1-(1+0.048/2)^-6]/(0.048/2) + 1000/(1+0.048/2)^6

= 1058.03