# Answer for Number 23 - 1 A newly-issued corporate bond has...

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Bond Price: Calculating Price of bond To calculate the price of the bond we need to calculate / read from tables the values of PVIF= Present Value Interest Factor PVIFA= Present Value Interest Factor for an Annuity Price of bond= PVIF * Redemption value + PVIFA * interest payment per period PVIFA( n, r%)= =[1-1/(1+r%)^n]/r% PVIF( n, r%)= =1/(1+r%)^n Data No of years to maturity= 20 Coupon rate= 8.00% Face value= \$1,000 Frequency = S Semi annual coupon payments Discount rate annually= 7.00% (Yield to maturity) Redemption value = Face Value= \$1,000 Calculation of bond price: Interest payment per year= \$80.00 =8.% x 1000 Interest payment per period= \$40.00 =80/2 No of Periods =n= 40 =2x20 Discount rate per period = r = 3.50% =7.%/2 PVIF (40 periods, 3.5% rate)= 0.25 PVIFA (40 periods , 3.5% rate)= 21.36 PVIFA X Interest Payment= \$854.20 =21.355072 x 40 PVIF X Redemption value= \$252.57 =0.252572 x 1000 Price= \$1,106.77 =854.2+252.57 Answer: Price= \$1,106.77 b. What is the bond’s current yield (0.5 point)?

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Answer for Number 23 - 1 A newly-issued corporate bond has...

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