Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I would like to know how to find the NPER/N of this problem ( 38.5 ) step- by- step with pen-and-paper and with finance calculator.

I would like to know how to find the NPER/N of this problem ( 38.5 ) step- by- step with pen-and-paper and with finance calculator.image text in transcribed

discount to face vur at par. The lowest coupon de is zero. ideo -o-coupon bond with s assume it is now , bond. We will also of 4.3% stated annu. EXAMPLE 6.1 Zero-coupon bond Problem The Col atures on October 1, 2027. Let's assume oblem The Commonwealth of Kentucky issued a zero-coupon a par value of $1,000 that matures on Oct tober 1, 2007, the original issue date of this zero-coupon bond. w me the original issue of the bond had a yield to maturity of 4.3% ally. What was the bond's original issue price these bonds as semiannual he number of six-month -month periods until Solution Remember ution Remember that it is customary to price these bonds as sem nds. So we will count the number of periods as the number of six Periods to maturity. Here we have twenty years or forty six-month peri maturity. 043/2 = 0.0215 or METHOD 1 Using the equation The yield is 4.3%, so the semiannual discount rate is 0.043/2 = 0.02 2.15%: a = $1,000 X 0.4270 = $427.04 (1 + 0.0215) 40 bond price = $1,000 X When we look at Table 6.1, we see that the price of the Kentucky bond is 43.18%, or $431.80. If we use the stated yield of 4.410% and price it from August 1, 2008, the current date of the table, we have 38.5 semiannual periods left for the bond. We would therefore have bond price = $1,000 X 5 = $1,000 X 0.43184 = $431.84 (1 + 0.02205) 38.5 We can also use a spreadsheet or the TVM keys on a calculator to find the price of this bond. METHOD 2 Using the TVM keys Mode: P/Y = 2 and C/Y = 2 Input 38.5 4.410 ? KeyNWU CPT -431.84 0.00 PMT 1,000 FV

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Finance questions

Question

Which kind of lens is used to make a magnifying glass?

Answered: 1 week ago