Question

A three-year bond has an 8.0% coupon rate. If the yield to maturity on the bond...

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.

Homework Answers

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
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