J&J Manufacturing issued a bond with a $1,000 par value. The bond has a coupon rate of 7% and makes payments semiannually. If the bond has 20 years remaining and the annual market interest rate is 9.4%, what will the bond sell for today?a. $761b. $787c. $746d. $785e. $796

Answer:The correct option is d. $ 785Step-by-step explanation:Since, [tex]\text{Bond price}=\frac{C}{YTM}(1-\frac{1}{(1+\frac{YTM}{2})^{2M}})+\frac{FV}{(1+\frac{YTM}{2})^{2M}}[/tex]Where,C = Annual coupon payment,FV = Face value,M = Maturity in years,YTM = yield to maturity,Here,FV = $ 1,000,C = 7% of 1000 = [tex]\frac{7\times 1000}{100}[/tex] = 70,M = 20 years,YTM = 9.4% = 0.094,By substituting the values,[tex]\text{Bond price}=\frac{70}{0.094}(1-\frac{1}{(1+\frac{0.094}{2})^{40}})+\frac{1000}{(1+\frac{0.094}{2})^{40}}[/tex]= $ 785.3454  ( Using calculator )≈ $ 785Hence, OPTION d. is correct.