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.
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 |
Get Answers For Free
Most questions answered within 1 hours.