Redesigned Computers has 6.5 percent coupon bonds outstanding with a maturity date of 8 years from...
Redesigned Computers has 6.5 percent coupon bonds outstanding with a maturity date of 8 years from now. The yield to maturity is 16 percent and the face value is $1,000. Interest is paid semiannually. What is the market price for these bonds?
Homework Answers
Number of periods = 8 * 2 = 16
Rate = 16% / 2 = 8%
Coupon = (0.065 * 1000) / 2 = 32.5
Market price = Coupon *[1- 1 / (1 + r)n] / r + FV/ (1 + r)n
Market price = 32.5 * [1- 1 / (1 + 0.08)16] / 0.08 + 1000 / (1 + 0.08)16
Market price = 32.5 * [1 - 0.29189] / 0.08 + 291.89047
Market price = 32.5 * 8.85137 + 291.89047
Market price = $579.56
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