App Store Co. issued 15-year bonds one year ago at a coupon rate of 7.6 percent. The bonds make semiannual payments.

App Store Co. issued 15-year bonds one year ago at a coupon rate of 7.6 percent. The bonds make semiannual payments.

Required:

If the YTM on these bonds is 5.3 percent, what is the current bond price? (Do not include the dollar sign ($). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Current bond price

$

rev: 05-02-2011

Explanation:

To find the price of this bond, we need to realize that the maturity of the bond is 14 years. The bond was issued one year ago, with 15 years to maturity, so there are 14 years left on the bond. Also, the coupons are semiannual, so we need to use the semiannual interest rate and the number of semiannual periods. The price of the bond is:

P = $38.00(PVIFA2.65%,28) + $1,000(PVIF2.65%,28)

P = $1,225.32

Calculator Solution:

Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation.

Enter

14 × 2

5.3% / 2

±$76 / 2

±$1,000

N

I/Y

PV

PMT

FV

Solve for

$1,225.32