Answer:
Bond price= $1,101.59
Explanation:
Giving the following information:
Time= 15*2= 30 semesters
Par value= $1,000
Rate of return= 0.062/2= 0.031
Cupon= (0.0725/2)*1,000= $36.25
To calculate the value of the bond, we need to use the following formula:
Bond Price= cupon*{[1 - (1+i)^-n] / i} + [face value/(1+i)^n]
Bond price= 36.25*{[ 1 - (1.031^-30)] / 0.031} + [1,000/(1.031^30)]
Bond price= 701.42 + 400.17
Bond price= $1,101.59
