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bond Valuation with Semiannual Payments Renfro Rentals has issued bonds that have a 6% coupon rate,...

bond Valuation with Semiannual Payments Renfro Rentals has issued bonds that have a 6% coupon rate, payable semiannually. The bonds mature in 7 years, have a face value of $1,000, and a yield to maturity of 9.5%.

What is the price of the bonds? Round your answer to the nearest cent. $

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Answer #1

Information provided:

Face value= future value= $1,000

Time= 7 years*2= 14 semi-annual periods

Yield to maturity= 9.50%/2= 4.75%

Coupon rate= 6%/2= 3%

Coupon payment= 0.03*1,000= $30

The price of the bond is computed by calculating the present value.

The below has to be entered in a financial calculator to compute the present value:

FV= 1,000

N= 14

I/Y= 4.75

PMT= 30

Press the CPT key and PV to compute the present value.

The value obtained is 823.97.

Therefore, the price of the bond is $823.97.

In case of any query, kindly comment on the solution.

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