Question

Oil Well Supply offers 7.5 percent coupon bonds with semiannual payments and a yield to maturity of 7.68 percent. The bonds mature in 6 years. What is the market price per bond if the face value is $1,000?

Answer 1

Answer:

$991.47

Explanation:

We use the present value formula in this question that is shown on the attachment below:

Given that,  

Future value = $1,000

Rate of interest = 7.68%  ÷ 2 = 3.84%

NPER = 6 years × 2 = 12 years

PMT = $1,000 × 7.5% ÷ 2  = $37.5

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

So, after solving this, the market price per bond is $991.47