Question 1083905
<font color="black" face="times" size="4">
Answer: <font color=red>$4,881.80</font>
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Explanation:


Refer to the PDF at the link below
<a href = "https://people.ucsc.edu/~lbaum/econ80h/LS-Chap010.pdf">https://people.ucsc.edu/~lbaum/econ80h/LS-Chap010.pdf</a>
Specifically turn to page 6 for the formula we'll use. 
An example is shown on page 7.


The formula we're using is
*[Tex \Large \text{Bond Price} = \frac{C}{\text{YTM}}*\left[1 - \frac{1}{\left(1+\text{YTM}/2\right)^{2*M}}\right] + \frac{FV}{\left(1+\text{YTM}/2\right)^{2*M}}]
where
C = annual coupon payment (in dollars)
YTM = Yield To Maturity (expressed in decimal form)
M = Maturity of the bond (in years)
FV = face value of the bond (aka the par value in dollars)


In this case,
C = (coupon rate)*(Par value) = (3.7/100)*5000 = 185 dollars
YTM = (3.9/100) = 0.039
M = 16 years
FV = 5000 dollars


which are plugged into the formula to get...


*[Tex \Large \text{Bond Price} = \frac{C}{\text{YTM}}*\left[1 - \frac{1}{\left(1+\text{YTM}/2\right)^{2*M}}\right] + \frac{FV}{\left(1+\text{YTM}/2\right)^{2*M}}]


*[Tex \Large \text{Bond Price} = \frac{185}{\text{0.039}}*\left[1 - \frac{1}{\left(1+\text{0.039}/2\right)^{2*16}}\right] + \frac{5000}{\left(1+\text{0.039}/2\right)^{2*16}}]


*[Tex \Large \text{Bond Price} = 4743.58974358974*\left[1 - \frac{1}{\left(1+0.0195\right)^{32}}\right] + \frac{5000}{\left(1+0.0195\right)^{32}}]


*[Tex \Large \text{Bond Price} = 4743.58974358974*\left[1 - \frac{1}{\left(1.0195\right)^{32}}\right] + \frac{5000}{\left(1.0195\right)^{32}}]


*[Tex \Large \text{Bond Price} = 4743.58974358974*\left[1 - \frac{1}{1.85520268276352}\right] + \frac{5000}{1.85520268276352}]


*[Tex \Large \text{Bond Price} = 4743.58974358974*\left[1-0.539024662529268\right] + 2695.12331264634]


*[Tex \Large \text{Bond Price} = 4743.58974358974*0.460975337470732 + 2695.12331264634]


*[Tex \Large \text{Bond Price} = 2186.67788287399 + 2695.12331264634]


*[Tex \Large \text{Bond Price} = 4881.80119552033]


*[Tex \Large \text{Bond Price} = 4881.80]


So the bond price is roughly <font color=red>$4,881.80</font>
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