Answer:
$2,123
Explanation:
Given:
Coupon rate = 6.27%
Yield to maturity (r) = 5.7% / 2 = 2.85% = 0.0285 semi-annual
Face value (f) = $2,000
Number of payment (n) = 17 years × 2 = 34 times
Coupon payment = $2,000 × 6.27% = 125.4 / 2 = 62.7 semi-annual
Quoted price of the bond = ?
Computation of Quoted price of the bond:
[tex]Quoted\ price\ of\ the\ bond = c[\frac{1-(1+r)^{-n}}{r} ]+\frac{f}{(1+r)^n}\\\\Quoted\ price\ of\ the\ bond = 62.7[\frac{1-(1+0.0285)^{-34}}{0.0285} ]+\frac{2,000}{(1+0.0285)^{34}}\\\\Quoted\ price\ of\ the\ bond = 62.7[\frac{1-(1.0285)^{-34}}{0.0285} ]+\frac{2,000}{(1.0285)^{34}}\\\\Quoted\ price\ of\ the\ bond = 62.7[\frac{1-0.384639547}{0.0285} ]+\frac{2,000}{2.59983667}\\\\Quoted\ price\ of\ the\ bond = 62.7[\frac{0.61536}{0.0285} ]+\frac{2,000}{2.59983667}\\\\[/tex]
[tex]Quoted\ price\ of\ the\ bond = 62.7[21.5915789 ]+769.279\\\\\\Quoted\ price\ of\ the\ bond = 62.7[21.5915789 ]+769.279\\\\\\Quoted\ price\ of\ the\ bond = 2,123\\\\[/tex]
