What is the quoted price of a bond that has 4.5 years until maturity? The face value of the bond is $5000 and it has a coupon rate of 8.1% compounded semi-annually and a yield rate of 8.6% compounded semi-annually.

Question

Quizplus · Accepted Answer

To calculate the quoted price of the bond, we need to use the formula:

Quoted price = (C/(1+y/2)^n) + (FV/(1+y/2)^n)

Where:
C = Coupon payment per period
y = Yield rate per period
n = Total number of periods
FV = Face value of the bond

In this case, C = 8.1% of $5000/2 = $202.50, y = 8.6%/2 = 0.043, n = 4.5*2 = 9, and FV = $5000. Plugging in these values, we get:

Quoted price = ($202.50/(1+0.043)^9) + ($5000/(1+0.043)^9) = $4908.32

Therefore, the best choice is C.

What Is the Quoted Price of a Bond That Has