Question

# Haswell Enterprises' bonds have a 10-year maturity, a 6.25% semiannual coupon, and a par value of...

Haswell Enterprises' bonds have a 10-year maturity, a 6.25% semiannual coupon, and a par value of \$1,000. The going interest rate (rd) is 5%, based on semiannual compounding. What is the bond's price?

 a. \$1,090.43
 b. \$1,097.43
 c. \$1,086.93
 d. \$1,093.93
 e. \$1,100.9

Information provided:

Par value= future value= \$1,000

Time= 10 years*2= 20 semi-annual period

Coupon rate= 6.25%/2= 3.1250%

Coupon payment= 0.03125*1,000= \$31.25

Required rate of return= 5%/2= 2.50%

The price of the bond is calculated by computing the present value of the bond.

Enter the below in a financial calculator to compute the present value:

FV= 1,000

PMT= 31.25

N= 20

I/Y=2.5

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

The value obtained is 1,097.43.

Therefore, the bond’s price is \$1,097.43.

Hence, the answer is option b.

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

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