Answer:
The price of bond is $3838.49
Explanation:
The price of bond should be calculated on semiannual compounding periods which means that the rate is divided by 2 and years should be multiplied by 2
In mathematically,
Semi annual rate = Rate ÷ 2
= 4.4 ÷ 2
= 2.2%
And, the semi annual year = total number of years × 2
= 22 × 2
=44
The formula to compute the price of bond is shown below:
= Coupon payment ÷ ( 1+ rate) ^ number of years
= $10,000 ÷ ( 1+ 0.022) ^ 44
= ($10,000 ÷ 1.022) ^ 44
= $3838.49
Hence, the price of bond is $3838.49
