Weismann Co. issued 20-year bonds a year ago at a coupon rate of 10 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 8 percent, what is the current bond price?

The current bond price is $1,193.67

Explanation:

SOLVING FOR PV

nper: 38 (B/c it was issued a year ago, multiply 19 by 2)

rate = 8/2 =  4% (semi-annual payment)

PMT: -1000*10%/2

= -100 / 2  = -50

FV: -1,000

Finding out PV using the PMT formula in excel,

PV = (rate, nper, pmt, fv)

solve in excel

PV = $1,193.67

(excel file is attached for the formula input)

The bond price is $1193.68

Explanation:

The bonds were issued a year ago so the years remaining to maturity is 19 years and payments are made semi annually so

n = 19 * 2 = 38

Coupon payments 10 %  annually then semi annually is 5%

C = 5% *1000 = $50

FV = $1000

Yield to to maturity is 8% annually then 4% semiannually

Price of bond formula

P = {C × 1-(1+r)^-n/r} + (fv/(1+r)^n)

 ={50×1-(1+0.04)^-38/0.04)+ (1000/(1+0.04)^38)

 =968.39 + 225.29

=$1193.68

answer; i believe the correct answer is (4.0);

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