Question

Bond Valuation with Semiannual Payments

Renfro Rentals has issued bonds that have an 8% coupon rate, payable semiannually. The bonds mature in 12 years, have a face value of $1,000, and a yield to maturity of 7.5%. What is the price of the bonds? Round your answer to the nearest cent.

Answer 1

If Renfro Rentals has issued bonds that have an 8% coupon rate, payable semiannually. The price of the bonds is: $1,039.11.

Price of the bonds

We would be making use of financial calculator to find or determine the price of the bonds (Present value) by inputting the below data:

N represent Number of years = 12 x 2 = 24

I represent Interest rate= 7.5 % / 2 =3.75 %  

PMT represent Periodic payment= (8% x 1000) / 2 = $40

FV represent Future  value= $1,000

PV represent Present value=?

Hence;

PV (Present value) = $1,039.11

Therefore if Renfro Rentals has issued bonds that have an 8% coupon rate ,payable semiannually. The price of the bonds is:  $1,039.11.

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