Question

The Sisyphean Company has a bond outstanding with a face value of $ 5 comma 000 that reaches maturity in 8 years. The bond certificate indicates that the stated coupon rate for this bond is 9​% and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the Sisyphean bond is 10.6​%, then the price that this bond trades for will be closest​ to?

Answer 1

$4,575.60

Step-by-step explanation:

For computing the price of the bond we have to use the present value formula that is to be reflected in the attached spreadsheet which is presented below:

Given that,

Future value = $5,000

Rate of interest = 10.6% ÷ 2 = 5.3%

NPER = 8 years × 2 = 16 years

PMT = $5,000 × 9% ÷ 2 = $225

The formula is shown below:

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

So, after applying the formula the price of the bond is $4,575.60