Answer: $741.47
Explanation:
The price of a bond can be calculated using the following formula:
Price = (C / (1 + r/n)) * (1 - (1 / (1 + r/n)^(nt))) + (F / (1 + r/n)^(nt))
Where:
C is the coupon payment
r is the required return on the bond
n is the number of times the bond makes coupon payments per year
t is the number of years to maturity
F is the face value of the bond
In this case, the bond has a par value of $1,000 and makes SEMIANNUAL coupon payments, which means it makes payments twice per year. The required return on the bond is 10% and the bond has a 10-year maturity, so t = 10. The coupon payment can be calculated using the following formula:
C = (r * F) / n
Plugging in the values, we get:
C = (0.07 * 1000) / 2 = $35
Plugging these values into the formula for the price of a bond, we get:
Price = ($35 / (1 + 0.1/2)) * (1 - (1 / (1 + 0.1/2)^(210))) + ($1000 / (1 + 0.1/2)^(210))
Solving this equation, we get:
Price = $741.47
Therefore, the price of the bond is $741.47.