Question

Lincoln Park Co. has a bond outstanding with a coupon rate of 5.76 percent and semiannual payments. The yield to maturity is 6.3 percent and the bond matures in 21 years. What is the market price if the bond has a par value of $2,000?a. $1,876.09b. $1,880.53c. $1,878.06d. $1,912.67e. 1,875.17

Answer 1

e. 1,875.17

Step-by-step explanation:

The computation of the market price i.e. present value is as follows:

Given that

RATE = 6.3% ÷ 2 = 3.15%

NPER = 21 × 2 = 42

PMT = $2,000 × 5.76% ÷ 2 = $57.6

FV = $2,000

The formula is given below:

=-PV(RATE,NPER,PMT,FV,TYPE)

After applying the above formula, the market price is $1,875.17