A $1000 bond is purchased at a price to yield 6.5% compounded annually.The bond has 13% annual coupons.You are given that the interest portion of the second coupon is $93.38.What is the price of the bond? (Answer to the nearest dollar)

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The interest portion of the second coupon can be used to find the outstanding principal after the first coupon is paid. Since the bond pays 13% annually on its face value, and the interest portion of the second coupon is $93.38, which represents 6.5% of the outstanding principal after the first coupon, we can calculate this principal as $93.38 / 0.065 = $1436.62. This means that after receiving the first coupon, the outstanding principal is $1436.62. Given that the bond pays a 13% annual coupon, the first coupon payment would be 13% of the face value, which is $1000 * 0.13 = $130. To find the price of the bond, we subtract the first coupon received from the outstanding principal after the first coupon payment and then add back the face value of the bond, since the price of the bond is essentially the present value of all future cash flows (coupons and the face value at maturity) discounted at the yield rate. However, this approach seems to misinterpret the calculation process for bond pricing. The correct approach to find the bond price involves understanding that the interest portion of the coupon indicates how much of the coupon payment is interest based on the yield, not the coupon rate itself. The calculation provided does not directly lead to the bond price using the given information correctly. To correctly calculate the bond price, we use the given information about the yield and the coupons. The bond pays annual coupons of 13% of its $1000 face value, which is $130 annually. With a yield of 6.5%, the price of the bond is the present value of these coupon payments plus the present value of the face value of the bond, all discounted at the yield rate. The correct calculation involves using the formula for the present value of an annuity (for the coupon payments) plus the present value of a lump sum (for the face value of the bond). However, the specific details provided in the question (such as the interest portion of the second coupon being $93.38) are not directly used in a standard bond pricing formula. They might be part of a more complex calculation involving amortization of premium or discount, which is not fully detailed here.Given the lack of a direct calculation path from the provided information to the bond price using standard formulas, and acknowledging a mistake in the explanation process, the correct answer involves understanding that bond pricing with given yield, coupon rate, and maturity involves calculating the present value of future cash flows, which typically includes the annual coupon payments and the face value at maturity, all discounted back at the yield rate. Without the exact calculation steps provided for this specific scenario, one would typically use financial formulas or a financial calculator to determine the bond's price, taking into account the annual coupon rate, the yield to maturity, and the time to maturity. The correct answer, based on the information given and typical bond pricing methods, cannot be accurately determined without further clarification or the correct application of bond pricing formulas. Therefore, the initial explanation attempted to provide insight based on the given information but acknowledges the need for a correct and detailed calculation process to determine the bond price accurately.

A $1000 Bond Is Purchased at a Price to Yield