Ask Question
17 October, 04:05

Wesimann Co. issued 13-year bonds a year ago at a coupon rate of 8.5 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 6.8 percent, what is the current bond price?

+3
Answers (1)
  1. 17 October, 04:34
    0
    Current Price of the bond is $1,137.94

    Explanation:

    Price of a bond equals present value of coupon payments and the present value of face value at maturity

    Face value = $1000

    years to maturity equals to 12 years since the bond was issued a year ago and had 13 years to mature and payments are made semiannual = 12*2 = 24

    coupon payment since coupons are paid semiannual

    1000*8.5/2=$40.25

    YTM = 6.8%/2 = 3.4%

    bond price = C * [1 - (1+r) ^-n / r) + FV / (1+r) ^n

    =42.5 * [ 1 - (1+0.034) ^-24/0.034] + 1000 / (1+0.034) ^24

    =689.7046 + 448.2363

    =$1,137.94
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Wesimann Co. issued 13-year bonds a year ago at a coupon rate of 8.5 percent. The bonds make semiannual payments and have a par value of ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers