Question

Big Ten offers a 9 percent coupon bond with semiannual payments and a yield to maturity of 11.68 percent. The bonds mature in 16 years, what is the market price per bond if the face value is $1000?

A. 807.86

B. 863.08

c. 916.26

d. 1453.10

e. 1322.88

please show the process

Answer #1

**The Market price per
bond = $807.86**

Face Value = $1,000

Coupon Amount = [ $1,000 x 9% ] / 2 = $45

Discounting Rate = 11.68% / 2 = 5.84%

Period = 16 Years x 2 = 32 Years

Market Price of the Bond = Present Value of the Coupon Payments + Present Value of Face Value

= $45 x (PVIF 5.84%, 32 Years) + $1,000 x (PVF 5.84%, 32 Years)

= [ $45 x 14.338493 ] + [ $1,000 x 0.162633 ]

= $ 645.23 + $ 162.63

**= $807.86**

**Hence, The Answer is “ A. $807.86 “**

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