Wine and Roses, Inc., offers a bond with a coupon of 8.0 percent with semiannual payments and a yield to maturity of 8.66 percent. The bonds mature in 16 years. What is the market price of a $1,000 face value bond? pmt

The market price of a $1,000 face value bond is $944.

Explanation:

Market Value of Bond is calculated by following formula.

Coupon Payment = $1000 x 8% = $80

r = YTM = 8.66% = 0.0866

Face value = $1,000

n = number of periods = 16 yeasr

P = C [ (1 - (1 + r) ^-n) / r ] + [ F x (1 + r) ^-n]

P = $80 [ (1 - (1 + 0.0866) ^-16) / 0.0866 ] + [ $1,000 x (1 + 0.0866) ^-16]

P = $80 [ (1 - (1 + 0.0866) ^-16) / 0.0866 ] + [ $1,000 x (1 + 0.0866) ^-16]

P = $679.19 + $264.78

P = $943.97