Question

The Sisyphean Company has a bond outstanding with a face value of $1,000 that reaches maturity in 8 years. The bond certificate indicates that the stated coupon rate for this bond is 8​% and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the Sisyphean bond is 9.6​%, then this bond will trade at

Answer 1

this bond will trade at $912.05.

Step-by-step explanation:

There is an Inverse relationship between the yield and the price of bond.

1. As the yield goes up, the price of bond goes down, that is trade at discount.

1. Whereas, as the yield goes down, the price of bond goes up, that is trade at a premium.

The Bond investment in Sisyphean Company is trading at a discount.

The Price of the Bond, PV can be determined as follows..

PV = ?

FV = $1,000

PMT = ($1,000 × 8​%) ÷ 2 = $40

P/yr = 2

YTM = 9.6​%

n = 8 × 2 = 16

Using a Financial Calculator, the Price of the Bond, PV is $912.05.