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Connect × M MLK Holiday-jwilson14 × L Recent-Google Drive × Untitled docurment-Go x e Search Textbook Solutio , C0 https://newconnect.mheducation.com/flow/connect.html Apps D PowerTeacherMisc D AP GovernmentSt co D Work l Schedule Access Gmail % Mustang Public Schc D MACU Music e Final Cut Pro X102E D ASOIAF Human Geo #general 99 Talk Simple Team C D Library Chapter 5 Problems Help Save & Exit Submit Saved Check my work 4 Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company has a bond outstanding with a par value of 1,000, 20 years to maturity, and a coupon rate of 7.4 percent paid annually 10 points If the yield to maturity is 8.5 percent, what is the current price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current price eBook Print References Mc Graw Hill Prev 4 of 6 Next> Education

Explanation / Answer

price of bond = C/(1+r)1 + C/(1+r)2 +..............+C/(1+r)N + M/(1+r)N

C= INTEREST /CASH FLOW
M =MATURITY / FACE VALUE I.E 1000
N = NO. OF YEARS TO MATURITY I.E 20
DISC FACTOR = 1/(1+r)T
T=1,2,3........N
r = YTM RATE

CASH FLOW = INTEREST = INT RATE * PAR VALUE = 7.4% * 1000 = 74

PRICE OF SHARE = 895.90

t cash floW DISC factor = 1/(1+r)^t CF * DISC FACT 1 74 0.921658986 68.20276498 2 74 0.849455287 62.85969122 3 74 0.782908098 57.93519928 4 74 0.721574284 53.39649704 5 74 0.665045423 49.21336132 6 74 0.612945091 45.3579367 7 74 0.564926351 41.80454996 8 74 0.520669448 38.52953913 9 74 0.479879675 35.51109597 10 74 0.442285415 32.72912071 11 74 0.407636327 30.16508821 12 74 0.375701684 27.80192462 13 74 0.346268833 25.62389366 14 74 0.319141782 23.61649185 15 74 0.294139891 21.76635194 16 74 0.271096674 20.06115386 17 74 0.249858686 18.48954273 18 74 0.230284503 17.04105321 19 74 0.212243781 15.70603982 20 74 0.195616388 14.47561274 20 1000 0.195616388 195.6163884 PRICE OF SHARE = 895.9032973

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