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Giant electronics is issuing 20-year bonds that will pay coupons semiannually. the coupon rate on this bond is 7.8 percent. if the market rate for such bonds is 7 percent, what will the bonds sell for today? (do not round intermediate computations. round your final answer to the nearest dollar.) $1,085 $861 $1,037 $923

Respuesta :

shinmin
Given:
Years to maturity =n= 20
Coupon rate = C = 7.8%
Frequency of payment =m= 2
Semiannual coupon = $1,000 × (0.078/2) = $39.00
Current market rate =i= 7%
Present value of bond = P
Price of bond = 0.078 x 1000 x (1 – (1 + 0.07)^-20/0.07 + 1000/ (1.07) ^20= 78 x 10.60= 826.33 + 258.42= 1,084.75
The correct answer is: $1,085

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