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Sagot :
Maximum sum willing to pay the bond is $891.00.
What is a bond?
- Bonds are fixed-income securities that reflect loans from investors to borrowers (typically corporate or governmental).
- A bond can be compared to an agreement outlining the terms of the loan and the associated payments between the lender and borrower.
- Companies, municipalities, states, and sovereign governments utilize bonds to finance operations and initiatives. Bondholders are the issuer's debtors or creditors.
Given, we have :
Face Value = $1,000
Annual Coupon Rate = 9.50%
Time to Maturity = 15 years
yield to maturity = 11%
We know that Semiannual Coupon Rate will be = 4.75% .
So, Semiannual Coupon will be = Semiannual Coupon Rate × Face Value.
Semiannual Coupon = 4.75% × $1,000 = $47.50.
Semiannual Period will be for 15 year = 30
Semiannual yield to maturity will be here YTM = 5.50%
Current Price = Semiannual Coupon × [tex]\frac{1-(\frac{1}{1+r}) ^{t} }{r}[/tex][tex]+ \frac{f ae value}{(1+r)^{t} }[/tex]
Putting the values and solving further, we get:
Current Price = $891.00.
Therefore, Maximum sum willing to pay the bond is $891.00.
Know more about bonds with the help of the given link:
https://brainly.com/question/17405470
#SPJ4
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