Question

Bill Mitselfik has purchased a bond that was issued by Acme Chemical. This bond has a face value of ​$1 comma 000 and pays a dividend of 4​% per​ year, compounded​ semi-annually. Bill bought the bond five years ago at face value and there are six years remaining until the bond matures. Bill wishes to sell it now for a price that will result in Bill earning an annual yield of 6​% compounded​ semi-annually. What price does Bill need to sell the bond for to earn his desired​ return?

Answer 1

The correct answer is $1,114.64

Step-by-step explanation:

According to the scenario, the given data are as follows:

Rate (Semiannual) = 6% ÷ 2 = 3%

Time period = 5 years

Time period (semi annual) (Nper) = 5 × 2 = 10

Face value (PV) = $1,000

payment (pmt) = $1,000 × 4%/2 = $20

We can calculate the FV by using financial calculator,

The attachment is attached below.

So, the Price = $1,114.64