Question

The Sisyphean Company has a bond outstanding with a face value of $ 5,000 that reaches maturity in 15 years. The bond certificate indicates that the stated coupon rate for this bond is 8.5​% and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the Sisyphean bond is 10.6​%, then the price that this bond trades for will be closest​ to:

Answer 1

Bond Par Value = $5,000

Time to Maturity = 15 years

Coupon Rate = 8.50% semi-annually

YTM of Bond = 10.60%

Calculating Present Value of Bond,

Using TVM Calculation,

PV = [FV = 5000, T = 30, PMT = 212.50, I = 0.106]

PV = $4,219.83

So,

Present Value of Bond = $4,219.83