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Assume that you are considering the purchase of a 20-year, noncallable bond with an annual coupon rate of 9.5%. the bond has a face value of $1,000, and it makes semiannual interest payments. if you require an 8.4% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?

Respuesta :

Aliwohaish12
The formula is
V=  I/2 (PVIFAkd /2 ,2*n) + MV(PVIFkd /2 , 2*n)

I/2=(0.095×1,000)÷2=47.5

(PVIFA kd /2 ,2*n)=((1−(1+0.084÷2)^(−2
×20))÷(0.084÷2))

Mv=1000


(PVIFkd /2 , 2*n)=1÷(1+0.084/2)^(2×20)

So the answer is
V=47.5((1−(1+0.084÷2)^(−2
×20))÷(0.084÷2))+1000×1÷(1+0.084/2)^(2×20)=1,105.69...answer

Good luck!