You wish to purchase a20-year, $1,000 face value bond that makes semia

QUESTION

You wish to purchase a20-year, $1,000 face value bond that makes semiannual interestpayments of $40. If you require a 10% nominal yield tomaturity, what price should you be willing to pay for thebond? (Points: 4) $619 $674
Face Value (or) Par Value of the Bond = $1,000 Semi Annual InterestPayments = $40 Yield to Maturity(YTM) = 10% (10% /2 = 5%) Number of years toMaturity = 20 years (20years *2 =40 years) Current Market Price of the Bond = ? Market Price of the Bond = Coupon Payment

*[PVIFA 5%, 40 ] $1,000[PVF 5%, 40 ] Market Price of theBond = $40 * 17.1591 $1,000* 0.1420 Market Price of the Bond = $686.364 $142 Current Market Price of the Bond = $828.36

ANSWER:

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