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Oil Well Supply offers 7.5 percent coupon bonds with semiannual payments and a yield to maturity of 7.68 percent. The bonds mature in 6 years. What is the market price per bond if the face value is $1,
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Oil Well Supply offers 7.5 percent coupon bonds with semiannual payments and a yield to maturity of 7.68 percent. The bonds mature in 6 years. What is the market price per bond if the face value is $1,000?

User LxL
by
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1 Answer

4 votes

Answer:

$991.47

Step-by-step explanation:

We use the present value formula in this question that is shown on the attachment below:

Given that,

Future value = $1,000

Rate of interest = 7.68% ÷ 2 = 3.84%

NPER = 6 years × 2 = 12 years

PMT = $1,000 × 7.5% ÷ 2 = $37.5

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

So, after solving this, the market price per bond is $991.47

User Carl Sednaoui
by
5.1k points
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