Question

Moerdyk Corporation's bonds have a 15-year maturity, a 7.25% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 5.30%, based on semiannual compounding. What is the bond’s price?

Answer 1

$1,200.05

Step-by-step explanation:

rate = 5.3% / 2 = 2.65%

n = 15 years or 30 semesters

payment = 29 payments of $36.25 and one final payment of $1,036.25

We need to calculate the present value of the annuity and the final payment. I will use and excel spreadsheet and the NPV function: =NPV(discount rate (2.65%), series of cash flow (1-30)) = $1,200.05