A) What would be the value of this bond if it paid interest annually? (Round to

Question

A) What would be the value of this bond if it paid interest annually? (Round to nearest cent)

B) what would be the value of this bond if it paid interest semiannually? (Round to nearest cent.)

Save HW Score: 0%, 0 of 50 pts Question Help * Score: 0 of 4 pts 3 of 12 (O complete) P9-4 (similar to) (Related to Checkpoint 9.4) (Bond valuation) A bond that matures in 15 years has a $1,000 par va to maturity on a comparable-risk interest semiannually? bond is 13 percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond if it paid a. The value of this bond f it pad interest annually would be s(Round to the neatest cent) Enter your answer in the answer box and then click Check Answer part remaining O Type here to search

Explanation / Answer

Price of bond = coupon * (1 - (1+r/m)^(-n*m))/r + face value/( 1 + r/m)^(n*m)

where r is yeild and n is number of year to maurity

Price of bond when coupon paid annually = 70 * ( 1 - 1.13^(-15))/.13 + 1000/(1.13)^15

= $612.26

Price of bond when coupon paid semi ammually = 35 * (1 - 1.065^(-30))/.065 + 1000/(1.065)^30

= $608.24

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