Answer:
Bond's yield to maturity = 7.60%
Bond's price = $ 904.93
Explanation:
Suppose a ten-year, $1,000 bond with an 8.1% coupon rate and semi-annual coupons is trading for $1,034.69
A. What is the bond's yield to maturity(expressed an an APR with semi-annual compounding)?
fv =1000 , pmt = 8.1%*1000*1/2 = 40.50 , pv = 1034.69, nper= 10*2 = 20
Rate = rate(nper,pmt,pv,fv)
Rate = rate(20,40.50,-1034.69,1000)
Rate = 3.80%
Bond's yield to maturity = 3.80*2 = 7.60%
B. If the bond's yield to maturity changes to 9.6% APR, what will be the bond's price?
fv =1000 , pmt = 8.1%*1000*1/2 = 40.50 , nper= 10*2 = 20, rate = 9.6/2 = 4.8%
Bond's price = pv(rate,nper,pmt,fv)
Bond's price = pv(4.8%,20,40.50,1000)
Bond's price = $ 904.93
