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A $17,000, 8
A $17,000, 8.4% bond redeemable at par is purchased 7.5 years before maturity to yield 9.2% compounded semi-annually. If the bond interest is payable semi-annually, what is the purchase price of the bond?
The purchase price of the bond is $ (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)
Expert Solution
Computation of Purchase Price of Bond using PV Function in Excel:
=-pv(rate,nper,pmt,fv)
Here,
PV = Purchase Price of Bonds = ?
Rate = 9.2% / 2= 4.6%
Nper = 7.5 years * 2 = 15 periods
PMT = $17,000*8.4%/2 = $714
FV = $17,000
Substituting the values in formula:
=-pv(4.6%,15,714,17000)
PV or Purchase Price of Bonds = $16,274.71
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