Question

A bond with a face value of $1,800 pays half-yearly interest at a rate of 6%...

A bond with a face value of $1,800 pays half-yearly interest at a rate of 6% pa compounded half-yearly and has 7 years until maturity. The next interest payment is due in exactly one half-year. Calculate the price (P) required to yield 4% pa compounded half-yearly. Give your answer in dollars and cents to the nearest cent. P = $

Homework Answers

Answer #1

Face value = $1800, Coupon rate = 6% p.a compounded half yearly , No of years to maturity = 7

Yield to maturity = 4% p.a compounded half yearly

Semi annual coupon = (Coupon rate x Face value) / 2 = (6% x 1800) / 2 = 108/2 = 54

Semi annual yield to maturity = yield to maturity / 2 = 4% / 2 = 2%

No of half years to maturity = 2 x no of years to maturity = 2 x 7 = 14

To find the price of the bond we will use pv function in excel

Formula to be used in excel: =pv(rate,nper,-pmt,-fv)

Using pv function in excel we get price of bond = 2017.9124 = 2017.91 (rounded to two places off decimal)

Price of bond = $2017.91

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
A bond with a face value of $1300 pays a half-yearly interest rate if 6% p/a...
A bond with a face value of $1300 pays a half-yearly interest rate if 6% p/a compounded half-yearly and has 14 years till maturity. The next interest payment is due in exactly one half-year. Calculate the price (P) required to yield 4% pa compounded half yearly.
Calculate the present value on 28 March 2019 of $12,000 due on 15 October 2019 at...
Calculate the present value on 28 March 2019 of $12,000 due on 15 October 2019 at a simple interest rate of 9% pa. Give your answer in dollars and cents to the nearest cent. This days between dates calculator may assist you. P = $ Find the nominal annual rate of interest convertible daily (j365) that is equivalent to 6% pa effective. Give your answer as a percentage per annum to 3 decimal places. j365 = % pa Calculate the...
A bond with a $1,600 face value and 13 years remaining until maturity pays a coupon...
A bond with a $1,600 face value and 13 years remaining until maturity pays a coupon rate of 8.25% compounded semi-annually. Calculate the yield to maturity if the bond is priced at $1,280.
On 1 April 2020, the AOFM issued seven-year Government fixed-interest bonds with a face value of...
On 1 April 2020, the AOFM issued seven-year Government fixed-interest bonds with a face value of $25 million, paying half-yearly coupons at 6.50 per cent per annum. Coupons are payable on 31 March and 30 September each year until maturity. On 15 September 2022, the holder of the bonds sells at a current yield of 6.75 per cent per annum. You are required to calculate: n (number of periods) i  (current yield) C (coupon payment) k (fraction of elapsed interest period...
What is the value of a 18-year, 7.5% coupon, $1,000 face value bond that pays quarterly...
What is the value of a 18-year, 7.5% coupon, $1,000 face value bond that pays quarterly coupons, if its yield to maturity is 7%? Round to the nearest cent.
a) What is the value of a 6-year, 7.7% coupon, $1,000 face value bond that pays...
a) What is the value of a 6-year, 7.7% coupon, $1,000 face value bond that pays quarterly coupons, if its yield to maturity is 2.8%? Round to the nearest cent. b) You own a 17-year, 3.8% annual coupon bond with $1,000 face value. If the yield to maturity is 8.5%, what percentage of the bond's value comes from the present value of coupon payments? Answer in percent, rounded to one decimal place. c) Your company is undertaking a new investment...
A corporate bond with a face value of $200,000 was issued four years ago and there...
A corporate bond with a face value of $200,000 was issued four years ago and there are six years remaining until maturity. The bond pays semi-annual coupon payments of $9,000, the coupon rate is 9% pa paid twice yearly and rates in the marketplace are 10% pa compounded semi-annually. What is the value of the bond today? a. $200,000.00 b. $152,092.13 c. $196,454.05 d. $191,136.75 e. $193,536.79
(a)       Consider a 14-year, 9.5% corporate bond with face value $10,000. Assume that the bond pays...
(a)       Consider a 14-year, 9.5% corporate bond with face value $10,000. Assume that the bond pays semi-annual coupons. Compute the fair value of the bond today if the nominal yield-to-maturity is 11% compounded semi-annually. (b)       Consider a 11-year, corporate bond with face value $1,000 that pays semi-annual coupon. With the nominal yield-to-maturity equal to 10%, the bond is selling at $802.5550. Find the coupon rate for this bond. Assume that the market is in equilibrium so that the fair value...
Arizona Public Utilities issued a bond that pays $80in​ interest, with a $1,000 par value. It...
Arizona Public Utilities issued a bond that pays $80in​ interest, with a $1,000 par value. It matures in 20 years. The​ market's required yield to maturity on a​ comparable-risk bond is 7percent.  Assume the bond matures in 10 years instead of 20 ​years, what is the value of the bond if the yield to maturity on a​comparable-risk bond is 7​percent? ​(Round to the nearest​ cent.) Assume the bond matures in 10 years instead of 20 ​years, what is the value...
Suppose that Ally Financial Inc. issued a bond with 10 years until maturity, a face value...
Suppose that Ally Financial Inc. issued a bond with 10 years until maturity, a face value of $1000, and a coupon rate of 11% (annual payments). The yield to maturity on this bond when it was issued was 12. a. What was the price of this bond when it was issued? (Round to the nearest cent) b. Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes it first coupon payment? (Round...