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Renfro Rentals has issued bonds that have a 10% coupon rate, payable semiannually. The bonds mature in 8 years Answer

Renfro Rentals has issued bonds that have a 10% coupon rate, payable semiannually. The bonds mature in 8 years, have a face value of $1,000, and a yield to maturity of 8.5%. What is the price of the bonds?

Ans:

  Annual values Semi-annual Inputs
     
Years to Maturity 8 16
Coupon rate 10% 5%
Annual Payment $100 $50
Par value $1,000 $1,000
Going rate, rd 8.5% 4.25%
     
Value of bond = $1,084.59 $1,085.80

Since it is payable semiannually

So, Price of the bonds = $ 1085.80