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4 February, 05:16

Dufner Co. issued 15-year bonds one year ago at a coupon rate of 6.6 percent. The bonds make semiannual payments. If the YTM on these bonds is 5.5 percent, what is the current dollar price assuming a par value of $1,000?

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  1. 4 February, 07:28
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    The answer is $1,106.43

    Explanation:

    Number of years is 28years[ (15years - 1year) x 2]

    Yield-to-maturity (YTM) is 2.75% (5.5% : 2)

    Present value (PV) = ?

    Payment coupon (PMT) = $33[ (6.6% : 2) x $1,000]

    Future Value (FV) = $1,000.

    Using a Financial calculator;

    Present value is $1,106.43
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