Answer:
Sale of the Bond Price = $95,514
Explanation:
Data:
Coupon Rate = 8%
Face Value (F) = $100,000
Coupon (C) = 100,000 * 8% = $8,000
Market Rate (r) = 9%
No. of periods (n) = 6
Price = ?
Formula:
Bond Price = C * 1 - (1+r)^-n + F
r (1+r)^n
Solution:
Bond Price = 8,000 * 1 - (1 + 0.09)^-6 + 100,000
0.09 (1+0.09)^6
Bond Price = $95,514
Answer:
The issue Price will be less than $ 100000 because the 9 % market rate of interest was more than the stated (coupon) rate.
Explanation:
Because the interest rate of market rate is above the coupon rate , so the buyers of the bond will be ready to pay less than the bond face value what this means is that, a discount would be issue by the bond.
Since the coupon rate is 8 % and the market interest rate is 9 % we conclude that issue price will be less than face value that is $ 100000.
