Union local school district has a bond outstanding with a coupon rate of 2. 9 percent paid semiannually and 16 years to maturity. The yield to maturity on this bond is 2. 7 percent, and the bond has a par value of $5,000. What is the dollar price of the bond?.

The bond's present value (PV) represents the estimated future cash payments that will result from the bond. The value is equal to the sum of the discounted present values of the interest payments and the redemption value (RV).

Bond value equals PV of interest plus PV of RV

The Local School District's bond amount can be calculated as follows:

PV of interest payments

Semi annual interest payment:

= 2.9% × 5000× 1/2= 72.5

Semi-annual yield = 2.7/2 = 1.65%

Total period to maturity = (2 × 16) = 32 periods

PV of interest payment:

=72.5× (1- (1+0.016)^(-32)/0.016)

= 1804.66

PV of Redemption Value

= 5000× (1.016)^(-32)

= 3008.6

Price of bond

=1804.66 + 3008.6

=$4813.26

Therefore, The dollar Price of the bond is $4813.26

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