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he Metchosin Corporation has two different bonds currently outstanding. Bond M has a face value of...

he Metchosin Corporation has two different bonds currently outstanding. Bond M has a face value of $20,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $1,300 every six months over the subsequent eight years, and finally pays $1,600 every six months over the last six years. Bond N also has a face value of $20,000 and a maturity of 20 years; it makes no coupon payments over the life of the bond. The required return on both these bonds is 8% compounded semiannually, what is the current price of bond M and bond N?

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Answer #1

Price of bond is equals to the present value of all future cash flows generated by bond at yield rate (required rate).

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

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