Question

Tripple-Crown Inc. will start selling 10-year bonds today. The bonds have semiannual coupon payments, an annual coupon rate of 10%, and a par value of $1,000. The yield to maturity (YTM) for this bond is expected to be 8%. What is the price of the bond today?

Answer 1

Answer:

$1,135.90

Explanation:

The Price of the Bond today is its Present Value (PV) alternatively known as  the current price.

This can be calculated using a Financial Calculator by imputing values for the following parameters :

N = 10 × 2 = 20

P/YR = 2

PMT = ($1,000 × 10%) ÷ 2 = $50

FV = $1,000

I = 8 %

PV = ?

The PV will be $1,135.90

Therefore, the price of the bond today is $1,135.90