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Connect × \\ M MLK Holiday-jwilson14 × \\ L Recent-Google Drive × \\ Untitled docurment-Go x \\ e Search Textbook Solutio , C0 https://newconnect.mheducation.com/flow/connect.html Apps D PowerTeacherMisc D AP GovernmentSt co D Work l Schedule Access Gmail % Mustang Public Schc D MACU Music e Final Cut Pro X102E D ASOIAF Human Geo #general 99 Talk Simple Team C D Library Chapter 5 Problems Help Save & Exit Submit Saved Check my work 4 Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company has a bond outstanding with a par value of 1,000, 20 years to maturity, and a coupon rate of 7.4 percent paid annually 10 points If the yield to maturity is 8.5 percent, what is the current price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current price eBook Print References Mc Graw Hill Prev 4 of 6 Next> Education

Solution

price of bond = C/(1+r)¹ + C/(1+r)² +..............+C/(1+r)^N + M/(1+r)^N

C= INTEREST /CASH FLOW
M =MATURITY / FACE VALUE I.E 1000
N = NO. OF YEARS TO MATURITY I.E 20
DISC FACTOR = 1/(1+r)T
T=1,2,3........N
r = YTM RATE

CASH FLOW = INTEREST = INT RATE * PAR VALUE = 7.4% * 1000 = 74

PRICE OF SHARE = 895.90

t	cash floW	DISC factor = 1/(1+r)^t	CF * DISC FACT
1	74	0.921658986	68.20276498
2	74	0.849455287	62.85969122
3	74	0.782908098	57.93519928
4	74	0.721574284	53.39649704
5	74	0.665045423	49.21336132
6	74	0.612945091	45.3579367
7	74	0.564926351	41.80454996
8	74	0.520669448	38.52953913
9	74	0.479879675	35.51109597
10	74	0.442285415	32.72912071
11	74	0.407636327	30.16508821
12	74	0.375701684	27.80192462
13	74	0.346268833	25.62389366
14	74	0.319141782	23.61649185
15	74	0.294139891	21.76635194
16	74	0.271096674	20.06115386
17	74	0.249858686	18.48954273
18	74	0.230284503	17.04105321
19	74	0.212243781	15.70603982
20	74	0.195616388	14.47561274
20	1000	0.195616388	195.6163884
		PRICE OF SHARE =	895.9032973