How much are each of the semiannual coupon payments? Assuming the appropriate YTM on the Sisyphean bond is 8.8%, then at what price should this bond trade for?
The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in 15 years. The bond certificate indicates that the stated coupon rate for this bond is 8% and that the coupon payments are to be made semiannually.
Answer:
Coupon payments = (coupon rate × face value) / number of coupons per year
= (.08 × $1,000) / 2 = $40
FV = 1,000
I = 4.4% (8.8/2)
PMT = $40 ($80/2)
N = 30 (15 × 2)
Compute PV = $934.07
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