Answer:
$ 975.93
Explanation:
The market value of the bond can be computed using the pv formula in excel as follows:
=-pv(rate,nper,pmt,fv)
rate is the semiannual yield to maturity i.e 6.94%/2=3.47%
nper is the number of semiannual coupon payments the bondholders would receive ,which is 7*2=14
pmt is the semiannual coupon payment=$1000*6.5%*6/12=$32.5
fv is the face value at $1000
=-pv(3.47%,14,32.5,1000)
=$ 975.93
The price of the bond is $ 975.93 which means that it would be issued at a discount of $ 24.07 when compared to face value of $1000
