Question

BOND VALUATION

Nesmith Corporation's outstanding bonds have a $1,000 par value, a 11% semiannual coupon, 15 years to maturity, and an 9.5% YTM. What is the bond's price? Round your answer to the nearest cent.

Answer 1

Answer-

Nesmith Corporation's outstanding bonds

Face value = Par value = FV = $ 1000

Coupon payments = PMT = 11 % / 2 x $ 1000 = 5.5 % x $ 1000 = 0.055 x $ 1000 = $ 55 [ semiannual payments ]
Number of periods = N =15 x 2 = 30 [ semiannual periods ]
Yield to maturity = YTM = I/Y = 9.5 % / 2 = 4.75 % [ semiannual interest rate ]  

Bonds price = Present value = PV =?

Sunbstituting all values in financial calculator we get

Present value = PV = $ 1118.65

Therefore the bonds price = $ 1118.65