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6 April, 09:40

Union Local School District has a bond outstanding with a coupon rate of 3.3 percent paid semiannually and 15 years to maturity. The yield to maturity on this bond is 3.8 percent, and the bond has a par value of $10,000. What is the price of the bonds?

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Answers (2)
  1. 6 April, 09:59
    0
    The price of the bond is $9432.31

    Explanation:

    The current price of the bond can be computed using the present value formula in excel, which is given as = pv (rate, nper, pmt, fv)

    where rate is the yield to maturity of 3.8% divided by 2 as it is semi-annual interest paying bond.

    nper is the time to maturity of the bond of 15 years multiplied by 2

    pmt is the semi-annual interest receivable by investor

    3.3%/2*$10000=$165

    fv is the face value of $10,000

    =pv (3.8%/2,30,165,10000)

    pv=$9432.31

    The price of the bonds is $9432.31, which implies that the bonds are issued at discount to face value of $10,000
  2. 6 April, 10:00
    0
    the price of the bonds is $11,812.43

    Explanation:

    The Price of the Bond is equal to the Present Value of the Bond.

    Using a Financial Calculator insert the values as follows:

    Pmt = $10,000 * 3.3 % = $330

    N = 15

    YTM (i) = 3.8 %

    Fv = $10,000

    P/yr = 2

    PV = ?

    PV = - 11,812.4282

    Therefore the price of the bonds is $11,812.43
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Home » Business » Union Local School District has a bond outstanding with a coupon rate of 3.3 percent paid semiannually and 15 years to maturity. The yield to maturity on this bond is 3.8 percent, and the bond has a par value of $10,000.
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