(1 point) A 9 year $11000 par-valued bond pays semi-annual coupons. If the yield rate is...

Question

Question

(1 point) A 9 year $11000 par-valued bond pays semi-annual coupons. If the yield rate is y2 = 10% and the purchase price is $

Answer 1

Answer #1

Par Value = $11000

Time to Maturity = 9 years

Payment frequency(m) = semiannually or 2

YTM (r)= 10%

r/m = 5%

Purchase price = $7656.78

C = Coupon Payment

We Know that as per annuity formula

Purchase price = (C/(r/m))[1-(1/(1+r/m)^nm) + Pare Value / (1+r/m)ⁿ^m

7656.78 = (C/0.05)[1-(1/(1.05)¹⁸) + 11000 / (1.05)¹⁸

3086.05 = C*11.69

C = 264

Coupon Rate = C*m/Par Value = 264*2/11000 = 4.8%

Answer 2

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