Answer:
Bond price = $1124.62
Explanation:
n = 10 year, Cr =12%, FV= $1000, r=10% P =?
The bond makes semiannual coupon payments so have to solve for C
C = 12%*1000/2 =$60
The period payments
n = 10*2 = 20
r = 10%/2 =5%
BP = C* 1 -(1+r)^-n/r +FV/ (1+r)^n
=60*1-(1+0.05)^-20/0.05 + 1000/(1+0.05)^20
=747.73 +376.89
=$1124.62
Makes sense for the bond to trade above the par value since the required return/YTM is smaller than the coupon rate
