Yan Yan Corp. has a $5,000 par value bond outstanding with a coupon rate of 4.6 percent paid semiannually and 21 years to maturity. The yield to maturity on this bond is 4.1 percent.

Problem 7-10 Valuing Bonds [LO2]

Yan Yan Corp. has a $5,000 par value bond outstanding with a coupon rate of 4.6 percent paid semiannually and 21 years to maturity. The yield to maturity on this bond is 4.1 percent.

What is the price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Price

$

 

Explanation:

To find the price of this bond, we need to find the present value of the bond's cash flows. So, the price of the bond is:

P = $115(PVIFA2.05%,42) + $5,000(PVIF2.05%,42)

P = $5,349.73

Calculator Solution:

Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation.

 

Enter

42

2.05%

±$115

±$5,000

N

I/Y

PV

PMT

FV

Solve for

$5,349.73