Question4 20 pts Mick is considering acquiring a couple of Google bonds, which w

Question

Question4 20 pts Mick is considering acquiring a couple of Google bonds, which were initially offered with a face value of $1000 a coupon rate of 15% per year (paid semiannually), and a maturity of 13 years. However, these bonds already paid 4 coupons and Mick is planning to buy them now, right before the next coupon payment (hence coupon received at Mick time "zero"). Find the pure price of each Google bond if the current market interest rate for similar financial assets is 8% per year (compounded semiannually). Note: round your answer to two decimal places, and do not include spaces, currency signs, plus or minus signs, nor commas.

Explanation / Answer

1 Par value (FV) $                                          1,000 2 Coupon rate 15.00% 3 Number of compounding periods per year 2 4 = 1*2/3 Interest per period (PMT) $                                          75.00 5 Number of years to maturity 13 6 = 3*5 Number of compounding periods till maturity (NPER) 26 7 Market rate of return/Required rate of return 8.00% 8 = 7/3 Market rate of return/Required rate of return per period (RATE) 4.00% Bond pure price PV(RATE,NPER,PMT,FV)*-1 Bond pure price $                                    1,559.40

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