Question

You have a 2.250% $8,000 bond maturing August 14, 2025. You purchase the bond to settle...

You have a 2.250% $8,000 bond maturing August 14, 2025.

You purchase the bond to settle August 14, 2024 when yields are 8.250%

The purchase price of this bond is thus:

Round to 4 decimal points with work

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Answer #1

Assuming that the coupons are paid annually, the price of the bond can be calculated by using the formula:

Where C denotes the coupon amount;

r denotes the yield;

n denotes the maturity period

It can also be calculated using the Price function in MS -Excel:

Thus, the price of the bond is $ 7,392.3788

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