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Homework answers / question archive / The Company is issuing 10,000 bonds, each with a face value of $975, a stated rate of 8
The Company is issuing 10,000 bonds, each with a face value of $975, a stated rate of 8.5%, and a 20-year term. When the bonds are issued, the market rate is 7.1%.
Here, coupon frequency is not provided
Case 1: Coupon frequency is annual
Price=975*8.5%/7.1%*(1-1/1.071^20)+975/1.071^20=1118.49
Case 2: Coupon frequency is semiannual
Price=975*8.5%/7.1%*(1-1/(1+7.1%/2)^(2*20))+975/(1+7.1%/2)^(2*20)=1119.62
