Question

Question 4 of 4 A $7,500 bond that carries a 3.50% coupon rate payable semi-annually is purchased 8 years before maturity when the yield rate was 4.50% compounded semi-annua a. Calculate the purchase price of the bond. $0.00 Round to the nearest cent b. What is the amount of discount or premium on the bond? (click to select) amount is Round to the nearest cent Submit Assignment Submit Question

Answer 1

Bond Price = PV of CFs from it.

Period	CF	[email protected]%	Disc CF
1	$    131.25	0.9780	$    128.36
2	$    131.25	0.9565	$    125.54
3	$    131.25	0.9354	$    122.77
4	$    131.25	0.9148	$    120.07
5	$    131.25	0.8947	$    117.43
6	$    131.25	0.8750	$    114.85
7	$    131.25	0.8558	$    112.32
8	$    131.25	0.8369	$    109.85
9	$    131.25	0.8185	$    107.43
10	$    131.25	0.8005	$    105.07
11	$    131.25	0.7829	$    102.75
12	$    131.25	0.7657	$    100.49
13	$    131.25	0.7488	$      98.28
14	$    131.25	0.7323	$      96.12
15	$    131.25	0.7162	$      94.00
16	$    131.25	0.7005	$      91.94
16	$ 7,500.00	0.7005	$ 5,253.49
Bod Price			$ 7,000.78

DIscount = Face Value - BOnd Price

= $ 7500 - $ 7000.78

= $ 499.22

Pls comment, if any further assistance is required.