Question

Lion Corp. has a $10,000 par value bond outstanding with a coupon rate of 4.8 percent paid semiannually and 22 years to maturity. The yield to maturity on this bond is 4.2 percent. What is the dollar price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

$10,856.08

Step-by-step explanation:

For computing the dollar price of the bond we have to applied the present value formula which is to be shown in the attachment below:

Given that,

Future value = $10,000

Rate of interest = 4.2% ÷ 2 = 2.4%

NPER = 22 years × 2 = 44 years

PMT = $10,000 × 4.8% ÷ 2 = $240

The formula is shown below:

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

After applying the above formula, the dollar price of the bond is $10,856.08