q 13 Nesmith Corporation's outstanding bonds have a $1,000 par value, an 8% semiannual coupon, 20...

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Question

Nesmith Corporations outstanding bonds have a $1,000 par value, an 8% semiannual coupon, 20 years to maturity, and a 12% YTM q 13

Answer 1

Answer #1

Rate = 12% / 2 = 6%

Coupon = (0.08 * 1000) / 2 = 40

Number of periods = 20 * 2 = 40

Bond price = Coupon * [1 - 1 / (1 + r)ⁿ] / r + FV / (1 + r)ⁿ

Bond price = 40 * [1 - 1 / (1 + 0.06)⁴⁰] / 0.06 + 1000 / (1 + 0.06)⁴⁰

Bond price = 40 * [1 - 0.097222] / 0.06 + 97.222188

Bond price = 40 * 15.0463 + 97.222188

Bond price = $699.07

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Answer 2

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