Weismann Co
Subject:FinancePrice:2.87 Bought7
Weismann Co. issued 9-year bonds a year ago at a coupon rate of 8 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 8 percent, what is the current bond price? Multiple Choice
$1,000.00
$752.12
$1,470.09
$1,005.00
$1,010.00
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
Answer:
The bonds have 8 years left to maturity
Semiannual Coupon = $1000*8%/2 =$40
No of coupon payments = 8*2 = 16
Semiannual YTM = 8%/2 =4% =0.04
So, from the Bond pricing formula
Price of Bond = present value of coupon payments and face value redemption
= 40/0.04*(1-1/1.04^16)+1000/1.04^16
=$1000 (1st option)
