The market interest rate for bonds of similar risk and maturity is 4%. Interest is paid semiannually.

At what price will the bonds issue?

Price is the sum of the discounted cash flows...

value of coupons, use Present Value ordinary annuity "PVoa"

Coupon: 55,000 * 0.05 / 2 = 1,375

r = 0.04 / 2 = 0.02

n = 7 yrs * 2 = 14

PVoa = PMT[(1 - (1 / (1 + r)^n )) / r]

= 1375[(1 - (1 / 1.02^14)) / 0.02]

= 1375[(1 - 0.75788) / 0.02]

= 1375[12.10625]

= $16,646.09

PV of par: 55,000 / 1.02^14 = 41,683.12635, round to 41,683.13

Add the two together for Price: $58,329.22

The market interest rate for bonds of similar risk and maturity is 4%. Interest is paid semiannually.

At what price will the bonds issue?