Question

Kasey Corp. has a bond outstanding with a coupon rate of 5.88 percent and semiannual payments. The bond has a yield to maturity of 4.5 percent, a par value of $2,000, and matures in 23 years. What is the quoted price of the bond?

Answer #1

Price of Bond = Present Value of all future expected Cashflows |

Price of Bond = Present Value of Coupon Payments and Redemption Amount |

Price of Bond = [( $ 2,000*5.88%)/2* PVAF((4.5/2)%, (23*2) periods)] + [$ 2,000 * PV((4.5/2)%, (23*2) period)] |

Price of Bond = [$ 58.8 * PVAF(2.25%, 46 periods)] + [$ 2,000 * PV(2.25%, 46 period)] |

Price of Bond = [$ 58.8 * 28.4756] + [$ 2,000 * 0.3593] |

Price of Bond = $ 1,674.36 + $ 718.6 |

Quoted Price of Bond = $
2,392.96 |

**Computation of PVAF:**

r | 1+r | (1+r)^-n | 1- [(1+r)^-n] | [1- [(1+r)^-n]] /r |

2.25% | 1.0225 | 0.3593 |
0.6407 | 28.4756 |

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