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16 August, 07:20

Wine and Roses, Inc., offers a bond with a coupon of 8.5 percent with semiannual payments and a yield to maturity of 9.20 percent. The bonds mature in 6 years. What is the market price of a $1,000 face value bond?

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  1. 16 August, 08:49
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    The market price of a $1000 face value bond is $968.27

    Explanation:

    N = 9*2

    N=18

    CPT = I/Y

    CPT = 9.20/2

    CPT = 4.6

    PMT = 1000 (0.085/2)

    PMT = 42.5

    FV = 1000

    PV=

    42.5 * (0.417/0.046) + 1000/1.715

    Present value = $968.27
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