Question

Phili Manufacturing, Inc. bonds have a face value of $1,000, a coupon rate of 6.5 percent, semiannual interest payments, and mature in 19 years. What is the current price of these bonds if the yield to maturity is 6.65 percent

Answer 1

Answer:

Bond Price​= 913.95

Explanation:

Giving the following information:

Face value= $1,000

Cupon= (0.065/2)*1,000= 32.5

YTM= 0.0665/2= 0,03325

Time period= 19*2= 38

To calculate the price of the bond, we need to use the following formula:

Bond Price​= cupon*{[1 - (1+i)^-n] / i} + [face value/(1+i)^n]

Bond Price​= 32.5*{[1 - (1.03325^-38)] / 0.03325} + [1,000/(1.03325^38)]

Bond Price​= 625.42 + ^288.53

Bond Price​= 913.95