Roadside market has 8.45 percent coupon bonds outstanding that mature in 10.5 years. The bonds pay...
Roadside market has 8.45 percent coupon bonds outstanding that mature in 10.5 years. The bonds pay interest semiannually. What is the market price per bond if the face value is $1000 and the yield to maturity is 7.2 percent ? show with steps and formulas. no excel or word please
Homework Answers
(In $)
Market value of bond
= Coupon (Present value of annuity @ Ytm, n) + Redemption value (Present value @Ytm, n)
Since the bond is compounding semi annually
= 1000×8.45% (1/2) × (PVAF @ 3.6%, 21 periods) + 1000(PVF @ 3.6%, 21st period)
*Assume Redemption value is equals to Face value
= 42.25(14.560) + 1000(0.476)
= 615.16 + 476
= $ 1091.16
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