A & B Corporation issued bonds for 10 years, with face value of $10,000 and a...

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A & B Corporation issued bonds for 10 years, with face valueof $10,000 and a 6% annual coupon rate. What is the current marketprice of the bond if the market rate is 8%? Assume semi-annualpayments.
How would your answer change if the market rate falls to 6%?

Answer & Explanation Solved by verified expert

3.8 Ratings (621 Votes)

K = Nx2

Bond Price =? [(Semi Annual Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2

k=1

K =10x2

Bond Price =? [(6*10000/200)/(1 + 8/200)^k] + 10000/(1 + 8/200)^10x2

k=1

Bond Price = 8640.97

K = Nx2

Bond Price =? [(Semi Annual Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2

k=1

K =10x2

Bond Price =? [(6*10000/200)/(1 + 6/200)^k] + 10000/(1 + 6/200)^10x2

k=1

Bond Price = 10000

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A & B Corporation issued bonds for 10 years, with face value of $10,000 and a...

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90.2K

Verified Solution

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Finance

A & B Corporation issued bonds for 10 years, with face valueof $10,000 and a 6% annual coupon rate. What is the current marketprice of the bond if the market rate is 8%? Assume semi-annualpayments.
How would your answer change if the market rate falls to 6%?

Answer & Explanation Solved by verified expert

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A & B Corporation issued bonds for 10 years, with face value of $10,000 and a...

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Finance

A & B Corporation issued bonds for 10 years, with face valueof $10,000 and a 6% annual coupon rate. What is the current marketprice of the bond if the market rate is 8%? Assume semi-annualpayments.How would your answer change if the market rate falls to 6%?

Answer & Explanation Solved by verified expert

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A & B Corporation issued bonds for 10 years, with face valueof $10,000 and a 6% annual coupon rate. What is the current marketprice of the bond if the market rate is 8%? Assume semi-annualpayments.
How would your answer change if the market rate falls to 6%?