Question

Haswell Enterprises' bonds have a 14-year maturity, a 9% coupon, and a par value of $1,000. The going interest rate (rd) is 10%. Assuming semiannual compounding, what is the bond's price?

Answer 1

To calculate the price of Haswell Enterprises' bonds, use the present value formula for bonds. The bond's price can be calculated by discounting the future cash flows back to their present value.

Step-by-step explanation:

To calculate the price of Haswell Enterprises' bonds, we need to use the present value formula for bonds. The bond's price can be calculated by discounting the future cash flows (interest payments and the par value) back to their present value. In this case, we have a 14-year maturity, a 9% coupon, and a par value of $1,000.

Using the semi-annual compounding formula, we can calculate the bond's price:
Price = (Coupon Payment / Semi-Annual Interest Rate) * (1 - (1 / (1 + Semi-Annual Interest Rate)^Number of Periods)) + (Par Value / (1 + Semi-Annual Interest Rate)^Number of Periods)

Based on the given information, the bond's price would be $1,034.19.