A tech firm called IDK, Inc. has bonds that carry a 4% semi-annual coupon. These bonds mature in 16 years, and the face value is $1,000. What is the current price of these bonds if the YTM (the going market rate, rd) equals 5 percent? $891.62 $525.92 $890.75 $934.72 $1327.74

A tech firm called IDK, Inc. has bonds that carry a 4% semi-annual coupon. These bonds mature in 16 years, and the face value is $1,000. What is the current price of these bonds if the YTM (the going market rate, rd) equals 5 percent? $891.62 $525.92 $890.75 $934.72 $1327.74

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.

Question

A tech firm called IDK, Inc. has bonds that carry a 4% semi-annual coupon. These bonds mature in
16 years, and the face value is $1,000. What is the current price of these bonds if the YTM (the
going market rate, rd) equals 5 percent?
$891.62
$525.92
$890.75
$934.72
$1327.74

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