Answer:
Market price today $955.1347
Explanation:
To know the current market price we will calculate the present value ofthe cuopon payment and the maturity at the yield to maturity rate of 8.73%
Present value of the annuity
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
Cupon Payment: 1,000 face value x 8% / 2 payment per year = 40
time = 9 years x 2 payment per year = 18
rate = 8.73% = 0.0873 = 0.0873/2 = 0.04365
[tex]40 \times \frac{1-(1+0.04365)^{-18} }{0.04365} = PV\\[/tex]
PV $491.6747
Present value of the maturity
[tex]\frac{Maturity}{(1 + rate)^{time} } = PV[/tex]
Maturity = face value = 1,000.00
time 18.00
rate 0.04365
[tex]\frac{1000}{(1 + 0.04365)^{18} } = PV[/tex]
PV 463.46
Now we add both together to get the present value of the bond
PV c $491.6747
PV m $463.4599
Total $955.1347
