Question

The purchase price of a 7 year bond with coupons at 4% convertible quarterly, a redemption value of 1500 and a yield rate of 6% convertible quarterly is equal to 1305.20. calculate the par value of this bond.

A. 869
B. 964
C. 1034
D. 1229
E. 1393

Answer 1

The correct answer is option C. To calculate the par value of the bond, we can use the present value formula. The present value of a bond is the sum of the present values of its future cash flows, which include both coupon payments and the redemption value. Using the given information, we can calculate the present value of the bond and determine its par value.

Step-by-step explanation:

To calculate the par value of the bond, we can use the present value formula. The present value of a bond is the sum of the present values of its future cash flows, which include both coupon payments and the redemption value.

Using the given information:

1. 
   
3. 
   
5. 
   
7. 
   
9. 
   

We can now calculate the present value of the bond by discounting each cash flow:

1. 
   
3. 
   
5. 
   

Using the present value formula, we find that the par value of this bond is $1034. Therefore, the correct option is C. 1034.