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5 December, 17:03

Whatever, Inc., has a bond outstanding with a coupon rate of 5.74 percent and semiannual payments. The yield to maturity is 6.1 percent and the bond matures in 20 years. What is the market price if the bond has a par value of $1,000

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  1. 5 December, 17:32
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    current market price of the bond is $958.73

    Step-by-step explanation:

    given data

    coupon rate = 5.74 percent

    yield to maturity = 6.1 percent

    bond matures = 20 years

    future value = $1,000

    solution

    we get here PMT that is

    PMT = 1,000 * 5.74% : 2 ... 1

    PMT = $28.70

    and Number of Periods is

    NPER = 20 years * 2 = 40 semi-annual periods

    and here Rate of interest will be = 6.1% : 2 = 3.05%

    and we use here formula that is

    = - PV (Rate; NPER; PMT; FV; type)

    so we get

    current market price of the bond is $958.73
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