Roadside markets has 8.45 percent coupon bonds outstanding that mature in 10.5 years. the bonds pay interest semiannually. what is the market price per bond if the face value is $1,000 and the yield to maturity is 7.2 percent?

Total$1,091.0030

Explanation:

The market value of the bond will be the sum of the present value of the cuopon payment and the maturity date:

present alue of cuopon payment will be calculate as present value of an ordinary annuity:

C42.25   (1,000 face value x 8.45% /2 payment per year)

time21 (10 years at 2 payment per year+ 1 payment)

rate0.036   (here we use the YTM rate /2 because there are 2 payment per year)

PV$615.1803

Then, for the present value at maturity, we calculate the present value of a lump sum

Maturity   1,000.00

time   21.00

rate  0.036

PV   475.82

Finally, we add them both together

PV c$615.1803

PV m  $475.8227

Total$1,091.0030

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