Eric purchases a $8,000 fifteen-year 7% bond with semiannual coupons and a redemption value of $9,000. After twenty-three months, he sells the bond to Pierre who holds the bond for seven years and then sells it to Irene for the same price at which he bought it. She holds the bond until maturity. The nominal yield rates convertible semiannually earned by Eric and Irene are 3.6% and 3.8% respectively. Find the price for the bond at issue and the price Pierre paid for it.
Eric purchases a $8,000 fifteen-year 7% bond with semiannual coupons and a redemption value of $9,000. After twenty-three months, he sells the bond to Pierre who holds the bond for seven years and then sells it to Irene for the same price at which he bought it. She holds the bond until maturity. The nominal yield rates convertible semiannually earned by Eric and Irene are 3.6% and 3.8% respectively. Find the price for the bond at issue and the price Pierre paid for it.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Eric purchases a $8,000 fifteen-year 7% bond with semiannual coupons and a redemption
value of $9,000. After twenty-three months, he sells the bond to Pierre who holds the
bond for seven years and then sells it to Irene for the same price at which he bought
it. She holds the bond until maturity. The nominal yield rates convertible semiannually
earned by Eric and Irene are 3.6% and 3.8% respectively. Find the price for the bond at
issue and the price Pierre paid for it.
The answers are: the price at issue = 10529. 86
The price Pierre paid=10407.13
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