Question

Harrison Co. issued 15-year bonds one year ago at a coupon rate of 6.6 percent. The bonds make semiannual payments.

If the YTM on these bonds is 5.5 percent, what is the current dollar price assuming a $1,000 par value? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Current bond price:

Answer 1

HI

Here since the bond is offered one year ago hence its current time period will be 15-1= 14 years

coupon rate = 6.6 percent semiannualy so we will take coupon paymant = 3.3 percent per period

hence per period coupon payment= 1000*3.3%= 33

and total period will be 14*2=28 percent

and YTM is 5.5 % so per period YTM= 5.5%/2 = 2.75%

So now we will get the price of bond using excel PV function

formula= PV(rate,nper,PMT,fv)

here rate = 2.75%= 0.0275

nper= 28

PMT= 33

and fv= face value = $1000

so using this formula price of bond = $1,106.43

In excel this value wil come negative because this is a payment for bond.

fPV(0.0275,28,33,1000) ($1,106.43)

Thanks