FNB 100 Quiz 2 ezto.mheducation.com connect 8 100 Quiz 2 instructi Question 6 (o

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FNB 100 Quiz 2 ezto.mheducation.com connect 8 100 Quiz 2 instructi Question 6 (of 25) Save & Ex Problem 7-21 Compute Bond Price (LG4) Compute the price of a 4.5 percent coupon bond with 15 years left to maturity and a market interest rate of 6.8 percent. (Assume interest payments are semiannual.) (Do not round intermediate calculations and round your final answer to 2 decimal places.) Is this a discount or premium bond? Discount bond Premium bond References Book & Resources Problem 7-21 Compute Bond Difficulty 3 Intennediate Price (L.GA) Worksheet

Explanation / Answer

It is a discount bond.

1 Par value (FV) $                                        1,000 2 Coupon rate 4.50% 3 Number of compounding periods per year 2 4 = 1*2/3 Interest per period (PMT) $                                        22.50 5 Number of years to maturity 15 6 = 3*5 Number of compounding periods till maturity (NPER) 30 7 Market rate of return/Required rate of return 6.80% 8 = 7/3 Market rate of return/Required rate of return per period (RATE) 3.40% Bond price PV(RATE,NPER,PMT,FV)*-1 Bond price $                                      785.82

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