Answer:
The bond price is $ 9,184.18
Explanation:
I discounted all the future cash flows of the bond to present value in order to arrive at the price of the bond.
The discounting factor formula is 1/(1+r)^N where r is the rate of return of 3.4% divided by two as the return is semi-annualized and N is the relevant period of the cash flow.
The coupon is also divided by two to show that it is received twice a year.
Find attached detailed computation.
Answer: $9,184
Explanation:
In order to calculate the price of the bond, we have to calculate the present value of the bond's cash flows.
Therefore, the price ofthe bond is:
P = $145(PVIFA1.70%,48) + $10,000(PVIF1.70%,48)P = $9,184
