Question 18 1 pts Consider a $1,000 par value bond which pays an annual coupon rate...

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Answer 1

Answer #1

Coupon = (0.07 * 1000) / 2 = 35

number of periods = 8 * 2 = 16

Rate = 8% / 2 = 4%

Bond's price = Coupon * [1 - 1 / (1 + r)ⁿ] / r + FV / (1 + r)ⁿ

Bond's price = 35 * [1 - 1 / (1 + 0.04)¹⁶] / 0.04 + 1000 / (1 + 0.04)¹⁶

Bond's price = 35 * [1 - 0.533908] / 0.04 + 533.908176

Bond's price = 35 * 11.6523 + 533.908176

Bond's price = $941.74

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Answer 2

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