Question

Nungesser Corporation's outstanding bonds have a $1,000 par value, a 7% semiannual coupon, 7 years to maturity, and an 8.5% YTM. What is the bond's price? Round your answer to the nearest cent.

Answer 1

$922.07

Step-by-step explanation:

You can solve this question using a financial calculator. I'm using (TI BA II plus)

Since it is Semiannual coupon, adjust the YTM to semi annual rate and multiply 7 years by 2 since we have 2 semi annual periods per year.

Total duration of investment ;N = 7 * 2 = 14

Interest rate; I/Y = 8.5%/2 = 4.25%

Face value; FV = 1000

Semi annual Coupon Payment ; PMT = (7%/2)*1000 =35

then CPT PV = $922.07