Brins Furniture, Inc. has bonds maturing in twelve years with a coupon rate of 5.5% and...

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Brins Furniture, Inc. has bonds maturing in twelve years with a coupon rate of 5.5% and semiannual coupon payments. Investors

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Answer 1

Answer #1

Face Value = $1,000

Annual Coupon Rate = 5.50%
Semiannual Coupon Rate = 2.75%
Semiannual Coupon = 2.75% * $1,000
Semiannual Coupon = $27.50

Time to Maturity = 12 years
Semiannual Period = 24

Annual Interest Rate = 7.00%
Semiannual Interest Rate = 3.50%

Current Price = $27.50 * PVIFA(3.50%, 24) + $1,000 * PVIF(3.50%, 24)
Current Price = $27.50 * (1 - (1/1.035)^24) / 0.035 + $1,000 / 1.035^24
Current Price = $880

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Answer 2

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