Assume that you are considering the purchase of a 15-year, noncallable bond with an annual coupon rate of 9.55%.  The bond has a face value of $1000, and it makes semiannual interest payments.  If you require an 12.50%  yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72. A. $673.92B. $802.29C. $689.97D. $874.49E. $665.90

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Asked Oct 7, 2019
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Assume that you are considering the purchase of a 15-year, noncallable bond with an annual coupon rate of 9.55%.  The bond has a face value of $1000, and it makes semiannual interest payments.  If you require an 12.50%  yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?

Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72.
 
A. $673.92
B. $802.29
C. $689.97
D. $874.49
E. $665.90
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Face value of the bond-$1000 Annual coupon rate-9.55% As the interest payments are made semiannually, the semiannual coupon rate-9.55% 2=0.04775 Semiannual coupon payment= (Semiannual coupon rate) x (Face value) 0.04775x1000=$47.75 Annual yield to maturity=12.5% Semiannual yield to maturity=12.5%+2=6.25% The time period of the bond= 15 years As the interest is paid semiannually, the number of periods=15x2=30 years

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