Walther PPK: George Lazenby's bonds mature in nine years, offer an annual seven percent coupon rate, make semiannual payments, and have a yield to maturity of eight peprcent. What is the market value per bond considering the face value is $1,000

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Jamarcus

10 September, 21:33

Walther PPK: George Lazenby's bonds mature in nine years, offer an annual seven percent coupon rate, make semiannual payments, and have a yield to maturity of eight peprcent. What is the market value per bond considering the face value is $1,000

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Answers (1)

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Lina · Answer 1

The answer is $936.70

Explanation:

This is a semiannual paying coupon.

N (Number of periods) = 18 years (9years x 2)

I/Y (Yield to maturity) = 4percent (8 percent : 2)

PV (present value or market price) = ?

PMT (coupon payment) = $35 ([7 percent: 2] x $1,000)

FV (Future value or par value) = $1,000.

We are using a Financial calculator for this.

N = 18; I/Y = 4; PMT = 35; FV = $1,000; CPT PV = - 936.79

Therefore, the market price of the bond is $936.70