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Moerdyk Corporation’s bonds have a 13-year maturity, a 3.25% semiannual coupon, and a par value of...

Moerdyk Corporation’s bonds have a 13-year maturity, a 3.25% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 5.75%, based on semiannual compounding. What is the bond’s price?

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Answer #1

Par Value = $1,000

Annual Coupon Rate = 3.25%
Semiannual Coupon Rate = 1.625%
Semiannual Coupon = 1.625% * $1,000
Semiannual Coupon = $16.25

Time to Maturity = 13 years
Semiannual Period = 26

Annual YTM = 5.75%
Semiannual YTM = 2.875%

Price of Bond = $16.25 * PVIFA(2.875%, 26) + $1,000 * PVIF(2.875%, 26)
Price of Bond = $16.25 * (1 - (1/1.02875)^26) / 0.02875 + $1,000 * (1/1.02875)^26
Price of Bond = $16.25 * 18.136754 + $1,000 * 0.478568
Price of Bond = $773.29

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