Kasey Corporation has a bond outstanding with a coupon rate of 5.96 percent and semiannual payments. The bond has a yield to maturity of 5.3 percent, a par value of $2,000, and matures in 19 years. What is the quoted price of the bond?

Multiple Choice

2,372.56

107.84

108.15

110.00

2,156.87

To find the quoted price of Kasey Corporation's bond, we will use the **present value formula** for bonds. The price of a bond is the present value of its coupon payments plus the present value of its par value at maturity.

### Formula:
The price of the bond (P) is calculated as:

\[
P = C \times \left(1 - \frac{1}{(1 + r)^n}\right) \div r + \frac{F}{(1 + r)^n}
\]

Where:
- $ C $ = Coupon payment (semiannual)
- $ r $ = Yield to maturity per period (semiannual)
- $ n $ = Total number of periods
- $ F $ = Par value of the bond

### Step-by-step calculation:

1. **Coupon payment (C):**
   The coupon rate is 5.96%, and since payments are semiannual, the coupon payment is:
   \[
   C = \frac{5.96\% \times 2000}{2} = 59.6
   \]

2. **Semiannual yield (r):**
   The yield to maturity is 5.3%, so the semiannual yield is:
   \[
   r = \frac{5.3\%}{2} = 2.65\% = 0.0265
   \]

3. **Number of periods (n):**
   The bond matures in 19 years, so the number of semiannual periods is:
   \[
   n = 19 \times 2 = 38
   \]

4. **Par value (F):**
   The par value of the bond is $2,000.

Now, let's plug these values into the formula and calculate the bond price. I'll compute that for you.

The quoted price of the bond is approximately **$2,156.87**, which matches the given option.

Thus, the correct answer is:

**2,156.87**

Would you like a detailed breakdown of any part of the calculation?

Here are 5 related questions for further understanding:
1. How does an increase in the yield to maturity affect the bond price?
2. What happens to the bond price if the coupon rate increases?
3. How would the price change if the bond had quarterly payments instead of semiannual?
4. How does the time to maturity impact the sensitivity of a bond’s price to interest rate changes?
5. What is the difference between current yield and yield to maturity for bonds?

**Tip:** A bond’s price moves inversely with changes in interest rates—when yields rise, bond prices fall, and vice versa.

Kasey Corporation has a bond outstanding with a coupon rate of 5.96 percent and semiannual payments. The bond has a yield to maturity of 5.3 percent, a par value of $2,000, and matures in 19 years. What is the quoted price of the bond?

Learn how to calculate the quoted price of Kasey Corporation's bond, with a coupon rate of 5.96%, a par value of $2,000, and a yield to maturity of 5.3%. Step-by-step solution covering bond pricing formulas, yield to maturity, and semiannual payments. Suitable for advanced high school or undergraduate finance students.

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