Ask Question
10 June, 17:04

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

+5
Answers (1)
  1. 10 June, 18:41
    0
    Price of the bond is $2392.95

    Explanation:

    Price of the bond is the present value of all cash flows of the bond. Price of the bond is calculated by following formula:

    According to given data

    Coupon payment = C = $2,000 x 5.88% / 2 = $58.8

    Number of periods = n = 2 x 23 years = 46 periods

    Yield to Maturity = r = 4.5% / 2 = 2.25% semiannually

    Price of the Bond = $58.8 x [ (1 - (1 + 2.25%) ^-46) / 2.25% ] + [ $2,000 / (1 + 2.25%) ^46 ]

    Price of the Bond = $58.8 x [ (1 - (1 + 0.0225) ^-46) / 0.0225 ] + [ $2,000 / (1 + 0.0225) ^46 ]

    Price of the Bond = $58.8 x [ (1 - (1.0225) ^-46) / 0.0225 ] + [ $2,000 / (1.0225) ^46 ]

    Price of the Bond = $1674.3 + $718.65 = $2,392.95
Know the Answer?
Not Sure About the Answer?
Find an answer to your 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 ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers