Anderson Corp. has just issued semi-annual coupon bonds with a maturity of 7 years, a yield-to-maturity of 10.6% (APR, semi-annually compounded), a face value of $1,000/bond, and an annual coupon rate of 10.6%. What was the price of one bond at issuance?

To calculate the price of the bond at issuance, we need to calculate the present value of the bond's cash flows, which consist of semi-annual coupon payments and the face value payment at maturity.

Step 1: Calculate the semi-annual coupon payment The annual coupon rate is 10.6%, so the semi-annual coupon rate is 10.6%/2 = 5.3%. The semi-annual coupon payment is 5.3% of the face value, which is $1,000. So, the semi-annual coupon payment is$1,000 * 5.3% = $53.

Step 2: Calculate the present value of the coupon payments The bond makes 2 * 7 = 14 semi-annual coupon payments. The present value of these payments is the sum of the present values of each individual payment. The present value of a payment is the payment amount divided by (1 + the semi-annual yield-to-maturity rate) raised to the power of the payment number. The semi-annual yield-to-maturity rate is 10.6%/2 = 5.3%. So, the present value of the coupon payments is $53 / (1 + 5.3$53 / (1 + 5.3%)^2 + ... + $53 / (1 + 5.3%)^14.

Step 3: Calculate the present value of the face value payment The bond pays its face value at maturity, which is in 7 years or 14 semi-annual periods. The present value of this payment is the face value divided by (1 + the semi-annual yield-to-maturity rate) raised to the power of the number of periods until the payment. So, the present value of the face value payment is $1,000 / (1 + 5.3%)^14.

Step 4: Add up the present values The price of the bond at issuance is the sum of the present values of the coupon payments and the face value payment. So, add up the results from steps 2 and 3 to get the price of the bond at issuance.