Question

Nesmith Corporation's outstanding bonds have a $1,000 par value, an 9% semiannual coupon, 19 years to maturity, and an 11% YTM. What is the bond's price? Round your answer to the nearest cent.

Answer 1

Price of a bond is the PV of the expected cash flows from
the bond if, it is held till maturity.
The expected cash flows are the (1) face value of the bond of $1,000 which, is
receivable at the end of the term of the bond [EOY 19]
and the semi-annual interest payments of $45, which constitute an annuity.
The discount rate to be used is the market rate of interest (YTM) of 11.00%,
the semi-annual interest rate being 5.5%.
Current price of the bond = 1000/1.055^38+45*(1.055^38-1)/(0.055*1.055^38) =	$         841.95