Homework Question help Needed

label Accounting
account_circle Unassigned
schedule 1 Day
account_balance_wallet $5

With celebrity bonds, celebrity raise money by issuing bonds to investors. The royalties from sales of music are used to pay interest and principal on the bonds. The bond was issued with a coupon rate of 6.5% and will mature on this day 34 years from now. The yield on the bond is currently 6.33%. At what price should this bond trade today assuming face value of $1,000 and annual coupons? The price of the bond today should be? (Round to nearest cent)

Jul 1st, 2015

Thank you for the opportunity to help you with your question!

Here coupon rate = 6.5% 0f 1000 = 65 annually, i = 6.33/100=0.0633, t = 34 years

Bond price = 65[1- 1.0633^-34]/(6.33/100) +1000*1.0633^-34 = 1023.52

Bond price = 1023.52

Please let me know if you need any clarification. I'm always happy to answer your questions.
Jul 1st, 2015

This is incorrect answer

Jul 1st, 2015

Here coupon rate is annual.

If coupon rate is semi-annual, bond price = 1688.44

Jul 1st, 2015

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Jul 1st, 2015
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Jul 1st, 2015
Jun 26th, 2017
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