Use the information for the question(s)below.
The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in 15 years.The bond certificate indicates that the stated coupon rate for this bond is 8% and that the coupon payments are to be made semiannually.
-Assuming the appropriate YTM on the Sisyphean bond is 9.0%,then the price at which this bond trades will be closest to:
A)$946.
B)$919.
C)$1086.
D)$1000.

Question

Quizplus · Accepted Answer

First, we need to calculate the semi-annual coupon payment:
Coupon rate = 8%
Face value = $1000
Semi-annual coupon payment = (8% / 2) * $1000 = $40

Next, we need to calculate the number of semi-annual periods remaining until maturity:
Number of years to maturity = 15 years
Number of semi-annual periods = 15 * 2 = 30

Now we can use the bond pricing formula to calculate the price at which the bond trades:
Price = ($40 / (1 + 0.045)^1) + ($40 / (1 + 0.045)^2) + ... + ($40 + $1000 / (1 + 0.045)^30)
Price = $919.24 (rounded to the nearest cent)

Therefore, the best choice is B, with a price closest to $919.

Use the Information for the Question(s)below