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The Goodie Barn has a 7% coupon bond outstanding that matures in 13.5 years. The bond pays interest semiannually. What is the market price per bond if the face value is $1,000 and the yield to maturity is 14.78%? Select one: a. $255.27 b. $674.66 c. $954.92 d. $550.40 e. $967.38

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Answer:

Bond Price​= 550.4

Explanation:

Giving the following information:

Cupon= (0.07/2)*1,000= $35

Periods= 27 semesters

Face value= $1,000

YTM= 0.1478/2= 0.0739

To calculate the bond price, we need to use the following formula:

Bond Price​= cupon*{[1 - (1+i)^-n] / i} + [face value/(1+i)^n]

Bond Price​= 35*{[1 - (1.0739^-27)] / 0.0739} + [1,000/(1.0739^27)]

Bond Price​= 404.52 + 145.88

Bond Price​= 550.4