Final answer:
To calculate the bond's price with a coupon rate of 5.53% and a current yield of 4.97%, we divide the annual interest payments by the current yield. This results in a bond price of approximately $1,111.47.
Step-by-step explanation:
The student is asking about how to find the price of a bond based on its coupon rate and current yield. To calculate the bond's price given a coupon rate of 5.53 percent, a current yield of 4.97 percent, and a par value of $1,000, we can use the relationship between current yield and the bond's price. Current yield is defined as the annual interest payments divided by the bond's price: Current Yield = (Annual Interest Payments) / (Bond's Price).
First, we find the annual interest payments by multiplying the coupon rate by the par value: Interest Payments = 5.53% of $1,000 = $55.30.
Then, we can solve for the bond's price using the current yield: Bond's Price = Annual Interest Payments / Current Yield = $55.30 / 4.97%.
To find the bond's price accurately, we need to express the current yield as a decimal, which is 0.0497. Thus, Bond's Price = $55.30 / 0.0497 = $1,111.47 (rounded to two decimal places).