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Weismann Co. issued 13-year bonds a year ago at a coupon rate of 11 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 6 percent, what is the current bond price?

Respuesta :

Answer:

$1,423.39

Explanation:

For computing the current bond price we use the present value formula i.e to be shown in the attachment below:

Given that,  

Future value = $1,000

Rate of interest = 6%  ÷ 2 = 3%

NPER = 13 years  - 1 year = 12 years × 2 = 24 years

PMT = $1,000 × 11% ÷ 2 = $55

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

After applying the above formula, the current bond price is $1,423.39

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