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Dexter Mills issued 20-year bonds one year ago at a coupon rate of 10.2 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM is 8.2 percent, what is the current bond price?

Respuesta :

Answer:

$1,190.93

Explanation:

In this question, we use the present value formula that is shown in the attachment. Kindly find it below:

Given that,  

Future value = $1,000

Rate of interest = 8.2%  ÷ 2 = 4.1%

NPER = (20 years - 1 years) × 2 = 38 years

PMT = $1,000 × 10.2% ÷ 2 = $51

The formula is shown below:

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

So, after solving this, the current bond price is $1,190.93

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