Cassidy Industries' circulating bonds have a face value of $800, a semiannual coupon of 8%, 12 years to maturity, and a YTM of 10%. Determine the price of the bond.
Cassidy Industries' circulating bonds have a face value of $800, a semiannual coupon of 8%, 12 years to maturity, and a YTM of 10%. Determine the price of the bond.
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
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Question
- Cassidy Industries' circulating bonds have a face value of $800, a semiannual coupon of 8%, 12 years to maturity, and a YTM of 10%. Determine the price of the bond.
Expert Solution
Step 1
Face value of bond = $ 800
Coupon rate = 8%
Semi annual coupon amount = 800*0.08/2 = $ 32
Years to maturity = 12 Years
Number of semi annual payments = 12*2 = 24
YTM = 10%
Semi annual YTM = 10%/2 = 5%
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