Merrill Lynch issued a corporate bond that promised to pay a coupon annually on July 15 and pay back the principal or par value on the maturity date, July 15, 2018. This particular bond was issued on July 15, 2008, so it is a ten-year corporate bond. Second, it provides the annual coupon rate of 6.5%, which indicates the annual interest payment on the bond. The discount rate on these future payments is the yield to maturity, 5.30%. Fitch, Inc.an international ratings agency rates Merrill Lynch AA (very high credit quality), and the bonds are not callable, meaning that the issuer cannot redeem the bond before its maturity date. Please calculate the price of the bond.

Merrill Lynch As of 15-Jul-2008

OVERVIEW

Price (% of par): 109.13

Coupon rate: 6.50%

Maturity date: 15-Jul-2018

Yield to maturity: 5.30%

Current yield: 5.96%

Fitch ratings: AA

Coupon payment frequency: Annual

First coupon date: 15-Jul-2009

Type: Corporate

Callable: No