Highlander inc offers 6.5% coupon bonds with payments and yield to a maturity of 6.94% percent...
Highlander inc offers 6.5% coupon bonds with payments and yield to a maturity of 6.94% percent . The bonds mature in seven years. How much would you be willing to pay for one bond?
A $989.70
B $975.93
C $902.60
D $996.48
E. 913.4
Homework Answers
Answer is $975.93
Face Value = $1,000
Annual Coupon Rate = 6.50%
Semiannual Coupon Rate = 3.25%
Annual Coupon = 3.25% * $1,000
Annual Coupon = $32.50
Annual YTM = 6.94%
Semiannual YTM = 3.47%
Time to Maturity = 7 years
Semiannual Period = 14
Price of Bond = $32.50 * PVIFA(3.47%, 14) + $1,000 * PVIF(3.47%,
14)
Price of Bond = $32.50 * (1 - (1/1.0347)^14) / 0.0347 + $1,000 /
1.0347^14
Price of Bond = $975.93
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Highlander inc offers 6.5% coupon bonds with payments and yield
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