Question

The Florida Investment Fund buys 54 bonds of the Gator Corporation through a broker. The bonds pay 8 percent annual interest. The yield to maturity (market rate of interest) is 10 percent. The bonds have a 15-year maturity. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.

Using an assumption of semiannual interest payments:

a. Compute the price of a bond. (Do not round intermediate calculations and round your answer to 2 decimal places.)

b. Compute the total value of the 54 bonds. (Do not round intermediate calculations and round your answer to 2 decimal places.)
  

The Florida Investment Fund buys 54 bonds of the Gator Corporation through a broker. The bonds pay 8 percent annual interest. The yield to maturity market rate of interest) is 10 percent. The bonds have a 15-year maturity. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Using an assumption of semiannual interest payments: a. Compute the price of a bond. (Do not round intermediate calculations and round your answer to 2 decimal places.) Price of the bond b. Compute the total value of the 54 bonds. (Do not round intermediate calculations and round your answer to 2 decimal places.) Total value Hints References eBook & Resources Hint #1 Check my work

Answer 1

Coupon =8%*1000/2 =40
Number of Periods =15*2 =30
Semi annual YTM =10%/2=5%
a. Price of bond =PV of Coupons +PV of Par Value =40*((1-(1+5%)^-30)/5%)+1000/(1+5%)^30 =846.27549 or 846.28

b. Total number of 54 bonds =54*846.27549=45698.88