Question

Moerdyk Corporation's bonds have a 15-year maturity, a 7.25% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 5.00%, based on semiannual compounding. What is the bond's price?

Answer 1

$1,235.47

Step-by-step explanation:

In this question, we use the present value formula which is shown in the spreadsheet.

The NPER represents the time period.

Given that,

Future value = $1,000

Rate of interest = 5% ÷ 2 = 2.5%

NPER = 15 years × 2 = 30 years

PMT = $1,000 × 7.25% ÷ 2 = $36.25

The formula is shown below:

= PV(Rate;NPER;PMT;FV;type)

So, after solving this, the answer would be $1,235.47