Eastern Sports bonds have a face value of $1,000,mature in 7 years,pay interest semiannually,and have a coupon rate of 7.25 percent.The next interest payment will be paid two months from today.What is the dirty price of this bond if the market rate of return is 7.5 percent?

Question

Quizplus · Accepted Answer

Bond value = [(.0725 × $1,000)/2] × ({1 - 1/[1 + (.075/2)]^{7 × 2}}/(.075/2))+ {$1,000/[1 + (.075/2)]^{7 × 2}} = $986.58 Dirty price = $986.58 + [(.0725 × $1,000/2)× (4/6)] = $1,010.75

Eastern Sports Bonds Have a Face Value of $1,000,mature in 7