Bond price: Kevin Rogers is interested in buying a five-year bond that pays a coupon of 10 percent on a semiannual basis. The current market rate for similar bonds is 8.8 percent. What should be the current price of this bond? (Round to the nearest dollar.)

Question

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The bond price is calculated using the present value of its future cash flows, which include semiannual coupon payments and the face value at maturity. With a coupon rate of 10% and a market rate of 8.8%, the bond price is higher than its face value, resulting in a price of approximately $1,048.

Bond Price: Kevin Rogers Is Interested in Buying a Five-Year