Question

Question 18

What is the price of a 30-year, 7% coupon rate, $1,000 face value bond that pays interest semi-annually, if the yield to maturity on similar bonds is 7.5%?

a. $886.9 |
||

b. $940.7 |
||

c. $1,065.6 |
||

d. $1,138.4 |
||

e. $1,219.2 |

Answer #1

**The value of the bond is computed as shown
below:**

**The coupon payment is computed as follows:**

= 7% / 2 x $ 1,000 (Since the payments are semi annually, hence divided by 2)

**= $ 35**

**The YTM will be as follows:**

= 7.5% / 2 (Since the payments are semi annually, hence divided by 2)

**= 3.75% or 0.0375**

**N will be as follows:**

= 30 x 2 (Since the payments are semi annually, hence multiplied by 2)

**= 60**

**So, the price of the bond is computed as
follows:**

**Bonds Price = Coupon payment x [ [ (1 - 1 / (1 +
r)**^{n}**] / r ] + Par
value / (1 + r)**^{n}

= $ 35 x [ [ (1 - 1 / (1 + 0.0375)^{60} ] / 0.0375 ] + $
1,000 / 1.0375^{60}

= $ 35 x 23.73791594 + $ 109.8281522

**= $ 940.7 Approximately**

**So, the correct answer is option b.**

Feel free to ask in case of any query relating to this question

What is the price of a 30-year, 7% coupon rate, $1,000 face
value bond that pays interest semi-annually, if the yield to
maturity on similar bonds is 6%?
a. $886.9
b. $940.7
c. $1,065.6
d. $1,138.4
e. $1,219.2

What is the price of a 30-year, 7% coupon rate, $1,000 face
value bond that pays interest semi-annually, if the yield to
maturity on similar bonds is 8%? a. $886.9 b. $940.7 c. $1,065.6 d.
$1,138.4 e. $1,219.2

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8.2%
coupon rate,
$1,000
face value bond that pays interest annually if the yield to
maturity on similar bonds is
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What is the price of a 4-year, 8% coupon rate, $1,000 face
value bond that pays interest quarterly if the yield to maturity on
similar bonds is 11.9%?

What is the price of a 3-year, 7.9% coupon rate, $1,000 face
value bond that pays interest quarterly if the yield to maturity on
similar bonds is
12.1%?

What is the price of a 3-year, 7.9% coupon rate, $1,000 face
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1. A 30-year bond has a face value of $1,000 and a 9% coupon
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Round to the nearest cent.

An Australian Government bond with a face value of $1,000 and an
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a. $947.21
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c. $945.08
d. $963.01

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simple interest rate, i.e 1.6% per 6-month period.
What is the price of
the bond?

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