Homework Answers
Call premium is $ 201.73
| Step-1:Calculation of maturity value of bond | ||||||||
| FV | =FV(I,N,PMT,PV) | Where, | ||||||
| = $ 1,201.73 | I | = | 8.5%/2 | = | 0.0425 | |||
| N | = | 5*2 | = | 10 | ||||
| PMT | = | 1000*7.6%*6/12 | = | $ 38.00 | ||||
| PV | = | $ -1,097.00 | ||||||
| Step-2:Calculation of call premium | ||||||||
| Call premium | = | Maturity value | - | Face value | ||||
| = | $ 1,201.73 | - | $ 1,000.00 | |||||
| = | $ 201.73 | |||||||
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