Question

	Settlement date	1/1/2000
	Maturity date	1/1/2015
	Annual coupon rate	7.00%
	Coupons per year	2
a)	Yield to maturity	8%
b)	Yield to maturity	10%
c)	Yield to maturity	12%
calculate the price of the bond

Answer 1

Case 1 - YTM = 8%

Annual Coupon rate = 7%

Semi Annual Coupon Rate = 3.5%

Semi Annual Coupon Payment = 35

Number of Years = 15

Number of Semi Annual Periods = 15 * 2 = 30

FV = 1,000

YTM = 8%

Semi Annual YTM = 4%

Using Financial Calculator:

PV = 813.35

Case 2 - YTM = 10%

Annual Coupon rate = 7%

Semi Annual Coupon Rate = 3.5%

Semi Annual Coupon Payment = 35

Number of Years = 15

Number of Semi Annual Periods = 15 * 2 = 30

FV = 1,000

YTM = 10%

Semi Annual YTM = 5%

Using Financial Calculator:

PV = 672.52

Case 3 - YTM = 12%

Annual Coupon rate = 7%

Semi Annual Coupon Rate = 3.5%

Semi Annual Coupon Payment = 35

Number of Years = 15

Number of Semi Annual Periods = 15 * 2 = 30

FV = 1,000

YTM = 12%

Semi Annual YTM = 6%

Using Financial Calculator:

PV = 565.05