CFAI text V4 P27 : Example 5 purchase, price

JonnyKay

Why the par value purchased and purchase price are $9,642,899.- given both the coupon rate and YTM are 7.5% ? and the price is 100.00000 ?
Anyone can help ?

xilinx_altera

The manager purchases $ 9,642,899 worth of bonds-which are selling at par. That is the total amount of money he had from the investors to invest in the bonds. That is why the par value and the price are the same. He has a target value (promised to the investors) of 13,939,413 which he needs to achieve by this investment.
The whole idea here is that unless the rates stay at 7.50, he will not be able to achieve this target. The table on the next page shows that.
Does that help ?

kseniaru

Price is 100. You have only 9,642,899 in you pocket so you can purchase 9,642.899 (9,642,899.-/100, since the price is 100.00000”) units of bond which worth $ 9,642,899.
You are getting confused between the price it is selling at which is at par 100 and the amount he has to purchase them. Do not even think about the YTM at this point. He is purchasing these bonds selling at 100 with 9,642,899 ( money he has), so he buys 9,642.899 (9,642,899/100) worth of bonds.
Is it clear now?

luckygiftvn

derwap07.
Thank you for your response again ! I am clear now !