Answer:
$1,144.36.
Explanation:
The value of the Enterprise bonds if the interest is paid semiannually is $1,144.36.
Here's the calculation:
- Semiannual coupon rate = 13% / 2 = 6.5%
- Number of periods = 10 years * 2 = 20
- Market's required yield to maturity = 9% / 2 = 4.5%
Present value of the coupons = (Semiannual coupon rate * Par value) * [1 - (1 + 0.045)^(-20)] / 0.045
= (0.065 * 1,000) * [1 - (1.045)^(-20)] / 0.045
= $793.19
Present value of the par value = Par value * [1 - (1 + 0.045)^(-20)] / 0.045
= 1,000 * [1 - (1.045)^(-20)] / 0.045
= $351.17
Value of the bond = Present value of the coupons + Present value of the par value
= $793.19 + $351.17
= $1,144.36
The value of the bond would be slightly lower if the interest were paid annually. This is because the bondholder would receive the coupons less frequently, so the present value of the coupons would be lower. The exact value of the bond if the interest were paid annually would depend on the number of days in the coupon period.