Question

The Rise Company has a bond outstanding with a face value of $ 1,000 that reaches maturity in 8 years. The bond certificate indicates that the stated coupon rate for this bond is 9.1​% and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the Rise bond is 7.5​%, then the price that this bond trades for will be closest​ to:

a. 1095

b. 1314

c.1533

d.876

Answer 1

Ans:- In this question, we need to find the Price of the bond.we will use the PV function of excel to find the answer.

Rate=7.5%/2, Nper= 8*2=16(since the bond makes payment semi-annually), Pmt=-$1,000 * 9.1%/2 = -$45.50, FV=-$1,000.

Therefore, the price of the bond is $1,095 (approx). option (a) is the right answer.

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