Question

What is the price of a bond with the following features? Face Value = $1,000 Coupon Rate = 4% (stated as an ANNUAL rate) Semiannual coupon payments Maturity = 5 years YTM = 4.48% (Stated as an APR) State your answer to the nearest penny (e.g., 984.25)

Answer #1

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N = 5*2 = 10(Semiannual bond for 5 years, so 10 payments)

PMT => 4% of 1,000 = 40/2 = -20 ( The coupon 4% is on Face Value, which is considered to be 1000, as )

FV = -1,000 (The Face value of bond is $1,000)

I/Y = 4.48/2 = 2.24 (As semiannual, so YTM divided by 2)

CPT + PV = 978.71

So the price of the bond is $978.71

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