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Hamilton, Inc. bonds have a coupon rate of 1414 percent. The interest is paid? semiannually, and the...

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Finance

Hamilton, Inc. bonds have a coupon rate of

1414

percent. The interest is paid? semiannually, and the bondsmature in

77

years. Their par value is

?$1 comma 0001,000.

If your required rate of return is

1212

?percent, what is the value of the? bond? What is the value ifthe interest is paid? annually?a. If the interest is paid?semiannually, the value of the bond is

?$nothing.

?(Round to the nearest? cent.)b. If the interest is paid?annually, the value of the bond is

?$nothing.

?(Round to the nearest? cent.)

Answer & Explanation Solved by verified expert
4.4 Ratings (705 Votes)

a

                  K = Nx2
Bond Price =? [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2
                   k=1
                  K =7x2
Bond Price =? [(14*1000/200)/(1 + 12/200)^k]     +   1000/(1 + 12/200)^7x2
                   k=1
Bond Price = 1092.95

b

                  K = N
Bond Price =? [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N
                   k=1
                  K =7
Bond Price =? [(14*1000/100)/(1 + 12/100)^k]     +   1000/(1 + 12/100)^7
                   k=1
Bond Price = 1091.28

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Transcribed Image Text

Hamilton, Inc. bonds have a coupon rate of1414percent. The interest is paid? semiannually, and the bondsmature in77years. Their par value is?$1 comma 0001,000.If your required rate of return is1212?percent, what is the value of the? bond? What is the value ifthe interest is paid? annually?a. If the interest is paid?semiannually, the value of the bond is?$nothing.?(Round to the nearest? cent.)b. If the interest is paid?annually, the value of the bond is?$nothing.?(Round to the nearest? cent.)

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