Question

What is the price of a bond with the following features? Face Value = $1,000 Coupon Rate = 7% (stated as an ANNUAL rate) Semiannual coupon payments Maturity = 7 years YTM = 4.43% (Stated as an APR) State your answer to the nearest penny (e.g., 984.25)

Answer 1

Face/Par Value of bond = $1000

Semi-annual Coupon Bond = $1000*7%*1/2

= $35

No of Coupon payments(n) = No of years to maturity*2 = 7 years*2

= 14

Semi-annual YTM = 4.43%/2 = 2.215%

Calculating the Market price of Bond:-

Price = $417.377 + $735.860

Price = $1153.24

So,the current market price of bonds is $1153.24

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