Jallouk Corporation has two different bonds currently outstanding. Bond M has a
ID: 2775547 • Letter: J
Question
Jallouk Corporation has two different bonds currently outstanding. Bond M has a face value of $30,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $1,400 every six months over the subsequent eight years, and finally pays $1,700 every six months over the last six years. Bond N also has a face value of $30,000 and a maturity of 20 years; it makes no coupon payments over the life of the bond. The required return on both these bonds is 10 percent compounded semiannually.
What is the current price of bond M and bond N? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
What is the current price of bond M and bond N? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Explanation / Answer
Bond M:
Bond N
YTM(semi annual) Period Coupon payment(semi annual) Discounting factor Face value Cash flow for the period Discounted cash flow 5 1 0 1.05 0 0 2 0 1.1025 0 0 3 0 1.157625 0 0 4 0 1.21550625 0 0 5 0 1.276281563 0 0 6 0 1.340095641 0 0 7 0 1.407100423 0 0 8 0 1.477455444 0 0 9 0 1.551328216 0 0 10 0 1.628894627 0 0 11 0 1.710339358 0 0 12 0 1.795856326 0 0 13 1400 1.885649142 1400 742.4498909 14 1400 1.979931599 1400 707.0951342 15 1400 2.078928179 1400 673.4239373 16 1400 2.182874588 1400 641.3561308 17 1400 2.292018318 1400 610.8153627 18 1400 2.406619234 1400 581.7289168 19 1400 2.526950195 1400 554.0275398 20 1400 2.653297705 1400 527.645276 21 1400 2.78596259 1400 502.5193105 22 1400 2.92526072 1400 478.5898195 23 1400 3.071523756 1400 455.7998281 24 1400 3.225099944 1400 434.0950744 25 1400 3.386354941 1400 413.4238804 26 1400 3.555672688 1400 393.7370289 27 1400 3.733456322 1400 374.9876466 28 1400 3.920129138 1400 357.131092 29 1700 4.116135595 1700 413.0087459 30 1700 4.321942375 1700 393.3416627 31 1700 4.538039494 1700 374.6111073 32 1700 4.764941469 1700 356.7724832 33 1700 5.003188542 1700 339.7833173 34 1700 5.253347969 1700 323.6031594 35 1700 5.516015368 1700 308.1934851 36 1700 5.791816136 1700 293.5176049 37 1700 6.081406943 1700 279.5405761 38 1700 6.38547729 1700 266.2291201 39 1700 6.704751154 1700 253.5515429 40 1700 7.039988712 30000 31700 4502.848129 Price= sum of discounted cash flows= 16553.8268Related Questions
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