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The coupon rate for a bond is 12%, the face value is $1,000, and YTM is...

The coupon rate for a bond is 12%, the face value is $1,000, and YTM is 12%, the bond market price (Bo) is (assume there are 15 years to maturity)

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Answer #1

When the coupon rate is equal to YTM, the market price will be equal to the face value.

That means the bond market price is $1000.

Let us find out by using the bond price formula:

Bond price formula:

Where,
C = Periodic coupon payment,
P = Par value or face value of the bond,
r = Yield to maturity
n = Years to maturity

C = 1000 * 12% = $120
r = 12% = 0.12

Therefore,

Therefore, the bond market price is $1000.00. So we can say that the bond is selling at par.

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