Phili Manufacturing, Inc.bonds have a face value of $1,000, a coupon rate of 6.5 percent, semiannual interest payments, and mature in 19 years.What is the current price of these bonds if the yield to maturity is 6.65 percent?

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Quizplus · Accepted Answer

The correct answer is C because the current price of the bond is $983.95. This is calculated using the following formula:Bond Price = (C * (1 - (1 + r/2)^(-n*2))) / r + (FV * (1 + r/2)^(-n*2))Where:C = Coupon payment = $1,000 * 6.5% / 2 = $32.50r = Yield to maturity = 6.65% / 2 = 3.325%n = Number of years to maturity = 19FV = Face value = $1,000Plugging these values into the formula, we get:Bond Price = ($32.50 * (1 - (1 + 0.03325)^(-19*2))) / 0.03325 + ($1,000 * (1 + 0.03325)^(-19*2))= $983.95