Question

Nesmith Corporation's outstanding bonds have a $1,000 par value, a 12% semiannual coupon, 16 years to maturity, and a 7% YTM. What is the bond's price? Round your answer to the nearest cent.

Answer 1

Price of a bond is mathematically represented as: 1 1-- (1 + i)" PEC. - +- м. (1 + i)" where P is price of bond, with periodic coupon C, n periods to maturity, periodic YTM i and face value M.

M = $1000, n = 16 * 2 = 32 semi-annual periods, i = 7%/2 = 3.5% (semi-annual), C = 12% * $1000/2 = $60

$P = 60 * \frac{1 - \frac{1}{(1 + 0.035)^{32}}}{0.035} + \frac{1000}{(1 + 0.035)^{32}}$

P = $1,144.1 + $332.6

P = $1,476.7