Question

Jeremy Kohn is planning to invest in a 10-year bond that pays a 12 percent coupon. The current market rate for similar bonds is 9 percent. Assume semiannual coupon payments. What is the maximum price that should be paid for this bond? (Do not round intermediate computations. Round your final answer to the nearest dollar.) $951 $1,195 $882 $1,033

*** no computer answers***

Written out formula please

Answer 1

K = Nx2

Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2

k=1

K =10x2

Bond Price =∑ [(12*1000/200)/(1 + 9/200)^k]     +   1000/(1 + 9/200)^10x2

k=1

Bond Price = 1195.12