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

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 8MC: Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for...

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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

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