Palmira Industries' outstanding bonds have a face value of $900, a semi-annual coupon of 7%, 10 years to maturity and a YTM of 9%. Determine the price of the bond.
Palmira Industries' outstanding bonds have a face value of $900, a semi-annual coupon of 7%, 10 years to maturity and a YTM of 9%. 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
Palmira Industries' outstanding bonds have a face value of $900, a semi-annual coupon of 7%, 10 years to maturity and a YTM of 9%. Determine the price of the bond.
Expert Solution
Step 1
Face value = $ 900
Coupon rate = 7%
Semi annual coupon amount = 900*0.07/2 = $ 31.50
Years to maturity = 10 Years
Number of semi annual period = 10*2 = 20
YTM = 9%
Semi annual YTM = 9%/2 = 4.5%
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