Calculate the price of a 11.2 percent coupon bond with 16 years left to maturity

Question

Calculate the price of a 11.2 percent coupon bond with 16 years left to maturity and a market interest rate of 6.8 percent. (Assume interest payments are semiannual.) (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Calculate the price of a 11.2 percent coupon bond with 16 years left to maturity and a market interest rate of 6.8 percent. (Assume interest payments are semiannual.) (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Explanation / Answer

Face value and future value of the bond is $1000.

Coupon amount = $1000*11.2%/2 = $56.

Nper = 16*2 =32

Rate = 6.8%/2 = 3.4%.

Compute the present value of the bond using excel funtion.

PV = PV(Rate, Nper,Pmt,FV) = PV(3.4%,32,56,1000) = $1425.09.

Therefore, the present value of the bond is $1425.09.

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