Question

Lincoln Park Co. has a bond outstanding with a coupon rate of 5.56 percent and semiannual payments. The yield to maturity is 6.7 percent and the bond matures in 11 years. What is the market price if the bond has a par value of $2,000?

A $1,824.53

B $1,827.34

C $1,829.74

D $1,861.02

E $1,826.45

Answer 1

Given,

Par value = $2000

Coupon rate = 5.56%

Yield to maturity = 6.7% or 0.067

Maturity = 11 years

Solution :-

Semi annual coupon payment (C) = $2000 x 5.56% x 6/12 = $55.60

Semi annual yield to maturity (r) = 0.067/2 = 0.0335

Semi annual periods (n) = 11 years x 2 = 22