Rogoff co.'s 15-year bonds have an annual coupon rate of 9.5%. each bond has face value of $1,000 and makes semiannual interest payments. if you require an 11% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?

Bonds are fixed-income securities that reflect loans from investors to borrowers (typically corporate or governmental).
A bond can be compared to an agreement outlining the terms of the loan and the associated payments between the lender and borrower.
Companies, municipalities, states, and sovereign governments utilize bonds to finance operations and initiatives. Bondholders are the issuer's debtors or creditors.

Given, we have :

Face Value = $1,000

Annual Coupon Rate = 9.50%

Time to Maturity = 15 years

yield to maturity = 11%

We know that Semiannual Coupon Rate will be = 4.75% .

So, Semiannual Coupon will be = Semiannual Coupon Rate × Face Value.

Semiannual Coupon = 4.75% × $1,000 = $47.50.

Semiannual Period will be for 15 year = 30

Semiannual yield to maturity will be here YTM = 5.50%

Current Price = Semiannual Coupon × [tex]\frac{1-(\frac{1}{1+r}) ^{t} }{r}[/tex][tex]+ \frac{f ae value}{(1+r)^{t} }[/tex]

Putting the values and solving further, we get:

Current Price = $891.00.

Therefore, Maximum sum willing to pay the bond is $891.00.

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