Dufner Co. issued 15-year bonds one year ago at a coupon rate of 7.1 percent. The bonds make semi-annual payments. If the YTM on these bonds is 5.4 percent, what is the current dollar price assuming a par value of $1,000?

Total$1,173.2544

Explanation:

The price of the bond will be equivalent to the coupon payment and maturity discounted at the YTM

Coupon payment PV will be an annuity:

C35.50 (1,000 x 7.1% / 2 )

time30 (15 years x 2 payment per year)

rate0.027 (YTM /2 )

PV$723.5919

The maturity will be the present value of a lump sum

Maturity   1,000.00

time   30.00

rate  0.027

PV   449.66

We add bot h to gett the market value

PV c$723.5919

PV m  $449.6625

Total$1,173.2544

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