Question

Moody's Corporation's bonds have a 15-year maturity, a 7.25% coupon
paid semiannually, and a par value of $1,000. If the going market
interest rate for bonds of similar risk and maturity is 6.00%
(based on semiannual compounding), what is the bond's price?

Your answer should be between 1075.00 and 1275.00.

Answer #1

**Solution.>**

I have solved this question in Excel. The formula used are written along with the values. If you still have any doubt, kindly ask in the comment section.

The formula for the bond price is:

Face Value | 1000 | FORMULA |

Coupon Rate | 0.0725 | |

Coupon Payment | 36.25 | =1000*0.0725/2 |

YTM | 0.03 | =0.06/2 |

No of Periods | 30 | =15*2 |

Bond Price |
1122.50 |
=36.25*((1-(1+0.03)^(-30))/(0.03))+1000*((1+0.03)^(-30)) |

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up if it helps! Thanks in advance!*

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