Question

Use the information below to find the price of the bond.

Yield to maturity	.065
Periods per year	2
Years to maturity	10
Face value aka maturity Value	1,000
Coupon	.045

a. Between $1,439 and $1,443

b. None of the choices is correct

c. Between $854 and $860

d. Between $1,177 and $1,182

Answer 1

Number of periods	20	=10*2
Semi-annual interest	22.5	=1000*4.5%*6/12
Semiannual Yield to maturity	3.25%	=6.5%*6/12
PV factor 3.25%:
Semi-annual interest	14.53935	=(1-(1.0325)^-20)/0.0325
Principal	0.52747	=1/1.0325^20
	Amount	PV factor 3.25%	Present value
Semi-annual interest	22.5	14.53935	327.14
Principal	1000	0.52747	527.47
Total			854.61
Between $854 and $860
Option c is correct