Question

A $50,000, 9.00% bond redeemable at par, with annual coupon payments, is purchased 7 years before...

A $50,000, 9.00% bond redeemable at par, with annual coupon payments, is purchased 7 years before maturity to yield 6.00% compounded annually.  

a. What was the purchase price of the bond?

Round to the nearest cent

b. What was the amount of discount or premium on the bond?

Homework Answers

Answer #1

a. Bond price formula:

Where,
C = Periodic coupon payment,
P = Par value of bond,
r = Yield to maturity
n = No. of periods till maturity

C = 50,000 * 9% = $4,500

Substituting the values in the formula, we get:

b. The bond is selling above its par value, that means the bond is selling at a premium.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Brady purchased a $25 000, 10.5 percent bond redeemable at par with semi-annual coupon payments. He...
Brady purchased a $25 000, 10.5 percent bond redeemable at par with semi-annual coupon payments. He purchased the bond 10 years before maturity to yield 12 percent compounded semi-annually. Six years after purchasing the bond (four years before maturity), what would be his selling price if the yield to maturity has not changed?
A ​$7,000​, 10​% bond redeemable at par with​ semi-annual coupons bought nine years before maturity to...
A ​$7,000​, 10​% bond redeemable at par with​ semi-annual coupons bought nine years before maturity to yield 9% compounded​ semi-annually is sold four years before maturity at 93.625. Find the gain or loss on the sale of the bond. ​(Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as​ needed.)
A $15 000, 8% bond with semi-annual interest coupons redeemable at par in seven years is...
A $15 000, 8% bond with semi-annual interest coupons redeemable at par in seven years is bought to yield 7% compounded semi-annually. Determine the amount of premium or discount.
A $85,000 bond with a coupon rate of 7.00%, payable semi-annually, is redeemable in 12.5 years....
A $85,000 bond with a coupon rate of 7.00%, payable semi-annually, is redeemable in 12.5 years. What was the purchase price of the bond, when the yield rate was 5.00% compounded semi-annually? Round to the nearest cent
Lionel purchased a $5,000 bond that was paying a coupon rate of 4.40% compounded semi-annually and...
Lionel purchased a $5,000 bond that was paying a coupon rate of 4.40% compounded semi-annually and had 8 more years to mature. The yield at the time of purchase was 5.80% compounded semi-annually. a. How much did Lionel pay for the bond? Round to the nearest cent b. What was the amount of premium or discount on the bond? (click to select)Premium or Discount amount was ____ Round to the nearest cent
A ​$51,000, 88​% bond redeemable at 104 with​ semi-annual coupons bought eleven years before maturity to...
A ​$51,000, 88​% bond redeemable at 104 with​ semi-annual coupons bought eleven years before maturity to yield 9% compounded​ semi-annually is sold three years before maturity at 102.25. Find the gain or loss on the sale of the bond. ​(Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as​ needed.)
A $4,500 bond pays interest at 7% compounded semi-annually. The bond is redeemable in 1 year...
A $4,500 bond pays interest at 7% compounded semi-annually. The bond is redeemable in 1 year 6 months, and is purchased to yield 8%. Find the purchase price of the bond. Calculate the premium or discount.
Helen purchased a $1,500 bond that was paying a coupon rate of 5.20% compounded semi-annually and...
Helen purchased a $1,500 bond that was paying a coupon rate of 5.20% compounded semi-annually and had 5 more years to mature. The yield at the time of purchase was 6.70% compounded semi-annually. a. How much did Helen pay for the bond? Round to the nearest cent b. What was the amount of premium or discount on the bond? (click to select)PremiumDiscount amount was Round to the nearest cent
A $10 000, 8.2% bond with semi-annual coupons is purchased 3 years before maturity. Calculate the...
A $10 000, 8.2% bond with semi-annual coupons is purchased 3 years before maturity. Calculate the discount or premium if the bond is sold to yield 6% compounded semi-annually.
A bond has a $1,000 par value, 8 years to maturity, and a 7% annual coupon...
A bond has a $1,000 par value, 8 years to maturity, and a 7% annual coupon and sells for $980. What is its yield to maturity (YTM)? Round your answer to two decimal places.     % Assume that the yield to maturity remains constant for the next two years. What will the price be 2 years from today? Do not round intermediate calculations. Round your answer to the nearest cent. $