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The Sisyphean Company has a bond outstanding with a face value of $1 000 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 semi-annually.
-Assuming the appropriate YTM on the Sisyphean bond is 7.5%, then the price that this bond trades for will be closest to:

Question

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The bond price can be calculated using the present value of its future cash flows, which include the semi-annual coupon payments and the face value of the bond at maturity. The coupon payment is $1,000 * 8% / 2 = $40 per period. There are 30 periods (15 years * 2). The discount rate per period is 7.5% / 2 = 3.75%. Using the present value formula for an annuity (for the coupon payments) and the present value formula for a single sum (for the face value), the bond price can be calculated, which will be closest to $1,045 when the YTM is slightly lower than the coupon rate, indicating the bond is trading at a premium.

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