Question

Weismann Co. issued 13-year bonds a year ago at a coupon rate of 11 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 6 percent, what is the current bond price?

Answer 1

$1,423.39

Step-by-step explanation:

For computing the current bond price we use the present value formula i.e to be shown in the attachment below:

Given that,

Future value = $1,000

Rate of interest = 6% ÷ 2 = 3%

NPER = 13 years - 1 year = 12 years × 2 = 24 years

PMT = $1,000 × 11% ÷ 2 = $55

The formula is shown below:

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

After applying the above formula, the current bond price is $1,423.39