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M. Poirot wishes to sell a bond that has a face value of $1,000. The bond bears an interest rate of 11.28% with bond interest payable semiannually. Six years ago, $979 was paid for the bond. At least a
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M. Poirot wishes to sell a bond that has a face value of $1,000. The bond bears an interest rate of 11.28% with bond interest payable semiannually. Six years ago, $979 was paid for the bond. At least a 12% return (yield) on the investment is desired. The minimum selling price must be: Enter your answer as follow: 1234.56

User BenCole
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1 Answer

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20 votes

Answer:

M. Poirot

The minimum selling price must be:

= $2,065.09.

Step-by-step explanation:

a) Data and Calculations:

Face value of bond = $1,000

Interest rate = 11.28%

Interest payment = semiannually

Price of bond six years ago = $979

Desired return (yield) rate = 12%

Minimum selling price can be determined as follows:

N (# of periods) 12

I/Y (Interest per year) 12

PV (Present Value) 979

PMT (Periodic Payment) 5.64

Results

FV = $2,065.09

Sum of all periodic payments $67.68

Total Interest $1,018.41

User Oscar Calderon
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