Question

A corporate bond with a face value of $200,000 was issued four years ago and there are six years remaining until maturity. The bond pays semi-annual coupon payments of $9,000, the coupon rate is 9% pa paid twice yearly and rates in the marketplace are 10% pa compounded semi-annually. What is the value of the bond today?

a.

$200,000.00

b.

$152,092.13

c.

$196,454.05

d.

$191,136.75

e.

$193,536.79

Answer 1

Period	Cash Flow	Discounting Factor [1/(1.05^year)]	PV of Cash Flows (cash flows*discounting factor)
1	9000	0.952380952	8571.428571
2	9000	0.907029478	8163.265306
3	9000	0.863837599	7774.538387
4	9000	0.822702475	7404.322273
5	9000	0.783526166	7051.735498
6	9000	0.746215397	6715.93857
7	9000	0.71068133	6396.131971
8	9000	0.676839362	6091.554258
9	9000	0.644608916	5801.480246
10	9000	0.613913254	5525.219282
11	9000	0.584679289	5262.113602
12	9000	0.556837418	5011.536764
12	200000	0.556837418	111367.4836
		Price of the Bond = Sum of PVs	191136.7484

Therefore, (D) $191136.75