Question

Consider a $1,000 par value bond with a 6% coupon rate paid semiannually, and has 9 years to maturity. What is the price of the bond if it is priced to yield 7%

Answer 1

Answer:

$934.05

Explanation:

Future value= $1,000

Coupon rate= 6%/2= 3%

Coupon payment= 0.03*1,000= $30

Time= 9 years*2= 18 semi-annual periods

Yield to maturity= 7%/2= 3.5%

The price of the bond = PV(FV, PMT, N, I/Y)

The price of the bond = PV(1000, 30, 18, 3.5%)

The price of the bond = $934.0515914

The price of the bond = $934.05

Therefore, the price of the bond is $934.05