Nike has bonds outstanding with five years to maturity and semiannual interest payments. The bonds pay...

Question

Question

Answer 1

Answer #1

Computation Of Bond Price

a	Semi-annual Coupon Amount	$ 25.00
	($1000*5%/2)
b	Present Value Annuity Factor for (10 Years,4.5%)	7.912718
c	Present Value Of Annual Interest (a*b)	$ 197.82
d	Redemption Value	$ 1,000.00
e	Present Value Factor Of (10 Years,4.5%)	0.64393
g	Present Value Of Redemption Amount (d*e)	$ 643.93
f	Price Of The Bond (c+g)	$ 841.75


Annual coupon amount = $25*2 = $50

Current Yield = Coupon amount / bond price

=50/841.75

=5.94%

Correct Option : None of the above

Answer 2

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