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