The current market price of the bond is $731.47
What is the market price of a bond?
The market price of a bond is the present of its future cash flows discounted at its semiannual required rate of return which is the appropriate discount rate in this case.
The market price can be ascertained using a financial calculator that requires that the calculator be set to its end mode since coupons are paid at the end of each semiannual period
N=50(number of semiannual periods in 25 years)
I/Y=4.0(semiannual yield =8.0%/2)
PMT=27.50(semiannual coupon=5.5%*1000/2=27.50)
FV=1000(bond's face value is $1000)
CPT(press compute)
PV=$731.47
The market price of a bond is the present of its future cash flows discounted at its semiannual required rate of return which is the appropriate semiannual discount rate of 4.0% is $731.47
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