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What is the purchase price of a $15,000, 5.5% bond with monthly coupons redeemable in eight...

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Finance

What is the purchase price of a $15,000, 5.5% bond with monthlycoupons redeemable in eight years if the bond is bought to yield4.5% compounded semi-annually?

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4.0 Ratings (443 Votes)

EAR = [(1 +stated rate/no. of compounding periods) ^no. of compounding periods - 1]* 100
Effective Annual Rate = ((1+4.5/2*100)^2-1)*100
Effective Annual Rate% = 4.55
                  K = Nx12
Bond Price =? [(Monthly Coupon)/(1 + YTM/12)^k]     +   Par value/(1 + YTM/12)^Nx12
                   k=1
                  K =8x12
Bond Price =? [(5.5*15000/1200)/(1 + 4.5506/1200)^k]     +   15000/(1 + 4.5506/1200)^8x12
                   k=1
Bond Price = 15953.44

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What is the purchase price of a $15,000, 5.5% bond with monthlycoupons redeemable in eight years if the bond is bought to yield4.5% compounded semi-annually?

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