Question

Intro A corporate bond has 19 years to maturity, a face value of $1,000, a coupon rate of 5.5% and pays interest twice a year. The annual market interest rate for similar bonds is 3.3%. - Attempt 1/10 for 9.5 pts. Part 1 What is the price of the bond (in $)? No decimals Submit

Answer 1

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hiven Part 1 Time fo maturity [n] = 19 years sx 2 = 38 periods face Value = $1000 Coupon rate = 5,5% peryear ie 2.75% per sin months Coupon amount = [2.75% of 1000] = $27.5 per 6 months Discount rate=(3-3/2] = 1.65% per 6 months Value = Coupon Amountxfresent Value dunuty factoy (1.65%, 38 perces) - face value x Present Value factor (1065% , 38 periods) = - 2007 (27.5% 28.061) + (1000X 00537) 771.79 + 537 #Discount factors can be seen $ 1308.79 150 и апии ity Fates Part 2 Time to maturity = It years X 2 = 34 periods Coupon rate= 565% /2 = 2.75% per 6 months Coupon amount = $27.5 per 6months Discounthate = 4.3/2 = 2.15% per 6months Value = Coupon Amount X Present Value Anawty factor (2.1576, 34petieds) face Value x Present value tectons (2.154, 34 pereeds) = (27.5X23.946) + (1000 x 0.485) = 2 658.52t u8 $ 1143.52 #Diswunt factors #Discunt factors can be taken from annusty Table