A bond has $94000 face value and the coupon rate of the bond is 3.4 % (APR), The VTM of the bond is 6.8 %. What is the fair price of the bond assuming that the maturity of the bond is 8 years and the bond pays coupon in every 6 months?fair price of bond = fair price = 19472.34 +55055.31 = 74,527.65 ve and the coupon rate of the bond is 3.4% (ARR ). %. What is the fair price of the bond assuming is 8 years and the bond pays coupon in ever STEPS: (1) semi annual coupon payment → Annual 12, Annual = 3.4% x 94000 = 3196 319612= 1,598 # at seni annual periods → y yrs x 2 = 16 periods (3) PV at coupon payments → = 3.4% per semiann period PV of annuity 6.8% 2 = 1,598 x [1-(1+0.034) 0.034 = 19472.34 (4) pv of face vawe = 94, 000 (1+0.034) ¹0 16 = 55055.31
A bond has $94000 face value and the coupon rate of the bond is 3.4 % (APR), The VTM of the bond is 6.8 %. What is the fair price of the bond assuming that the maturity of the bond is 8 years and the bond pays coupon in every 6 months?fair price of bond = fair price = 19472.34 +55055.31 = 74,527.65 ve and the coupon rate of the bond is 3.4% (ARR ). %. What is the fair price of the bond assuming is 8 years and the bond pays coupon in ever STEPS: (1) semi annual coupon payment → Annual 12, Annual = 3.4% x 94000 = 3196 319612= 1,598 # at seni annual periods → y yrs x 2 = 16 periods (3) PV at coupon payments → = 3.4% per semiann period PV of annuity 6.8% 2 = 1,598 x [1-(1+0.034) 0.034 = 19472.34 (4) pv of face vawe = 94, 000 (1+0.034) ¹0 16 = 55055.31
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
![A bond has $ 94000 face value and the coupon rate of the bond is 3.4 % (APR), The VTM of the bond is 6.8 %. What is the fair price of the bond assuming that the maturity of the
bond is 8 years and the bond pays coupon in every 6 months?fair price of bond = fair price=19472.34 +55055.31 = 74,527.65 ve and the coupon rate of the bond is 3.4% (ARR
). % . What is the fair price of the bond assuming is 8 years and the bond pays coupon in ever STEPS: (1) semi annual coupon payment Annual 12, Annual
y yrs x 2 = 16 periods (3) PV at coupon payments
= 3.4 % × 94000 = 3196 319612 = 1,598 # at seni annual periods
[1- (1 + 0.034)-¹6]
0.034
= 1,598 x
= 19472.34 (4) pv of face vawe =
94, 000
(1 + 0.034)
= 55055.31
16
6.8%
= 3.4% per semiann period PV of annuity
2](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffc3f7460-d377-40aa-b6c0-0ef92e3ced13%2F97073a4a-68da-490b-ab6b-602d2948e9f8%2Fzmbyi27_processed.png&w=3840&q=75)
Transcribed Image Text:A bond has $ 94000 face value and the coupon rate of the bond is 3.4 % (APR), The VTM of the bond is 6.8 %. What is the fair price of the bond assuming that the maturity of the
bond is 8 years and the bond pays coupon in every 6 months?fair price of bond = fair price=19472.34 +55055.31 = 74,527.65 ve and the coupon rate of the bond is 3.4% (ARR
). % . What is the fair price of the bond assuming is 8 years and the bond pays coupon in ever STEPS: (1) semi annual coupon payment Annual 12, Annual
y yrs x 2 = 16 periods (3) PV at coupon payments
= 3.4 % × 94000 = 3196 319612 = 1,598 # at seni annual periods
[1- (1 + 0.034)-¹6]
0.034
= 1,598 x
= 19472.34 (4) pv of face vawe =
94, 000
(1 + 0.034)
= 55055.31
16
6.8%
= 3.4% per semiann period PV of annuity
2
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 12 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Foundations Of Finance](https://www.bartleby.com/isbn_cover_images/9780134897264/9780134897264_smallCoverImage.gif)
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
![Fundamentals of Financial Management (MindTap Cou…](https://www.bartleby.com/isbn_cover_images/9781337395250/9781337395250_smallCoverImage.gif)
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
![Corporate Finance (The Mcgraw-hill/Irwin Series i…](https://www.bartleby.com/isbn_cover_images/9780077861759/9780077861759_smallCoverImage.gif)
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education