Question

A three-year bond has an 8.0% coupon rate. If the yield to maturity on the bond is 5.88%, calculate the present value of the bond.

Answer 1

Let's Asseume Bond face Vale= $ 100 and Reedembale Value= Market Value of Bond
Coupon rate		=	8%
Interest			8
YTM			5.88%
Maturity			3 Year
Formula of YTM
YTM	=	Interest+ ( Reedemable Value- Market Price)/N)/ (Market price+Reedemable value)/2
5.88	=	8+ ( Reedemable Value- Market Price)/N)/ (Market price+Reedemable value)/2
2.28	=	8/Reedemable VAlue
2.28( Reddemable Value)	=	8
Reedemable value	=	350.8772
Present Value of Bond	=	Present value of Reedmeable value after 3 Y ear + cum PV of 3interest received in 3 Year
		295.5999	+	21.44
		317.0399