The Jaxson Company offers a 6% coupon bond with semi-annual payments and a yield to maturity of 7.27%. The bonds mature in 6 years. What is the market price of a $1,000 face value bond?

Question

Quizplus · Accepted Answer

The correct answer is A because the market price of a $1,000 face value bond is $939.12. This is calculated using the following formula:Bond Price = $1,000 / (1 + (r/2))^nwhere:r = yield to maturity (7.27%)n = number of semi-annual periods (6 x 2 = 12)Plugging in the values, we get:Bond Price = $1,000 / (1 + (0.0727/2))^12Bond Price = $1,000 / (1.03635)^12Bond Price = $939.12

The Jaxson Company Offers a 6% Coupon Bond with Semi-Annual